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How do you reckon our democratic process operates? It could be something like this. We elect MPs. They legislate on bills. When a majority is obtained, the bills become law. The law are enforced by the courts. Simple as that. Well, that was how it operated in the past. Those days are over.

The Advent of Secret Courts

In the modern era, international firms, and the wealthy individuals who own them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these panels allow no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses based in this country. The door is open only to entities registered abroad.

Should an arbitration panel determines that a government measure may compromise the corporation’s anticipated profits, it may order financial penalties of vast sums, even billions.

This compensation constitute not actual losses but money the tribunal officials determine the company would perhaps have made. The state might be compelled to abandon its policy. It will be discouraged from passing future laws of a similar nature, for fear of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as companies take cues from each other, and private equity fund legal actions in exchange for a share of the awards. The consequence? Sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the decisions enacted by elected bodies is that this stipulation has been inserted – absent public approval, and often in conditions of extreme secrecy – within bilateral investment treaties.

A Real-World Example: The UK Coalmine

Twelve months ago, activists won a great victory at the High Court. The judge ruled that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no impact on climate commitments. The Labour government later cancelled the licence the Tories had granted. Now, this success is under threat by an secret arbitration panel accountable to only the entities bringing the case.

During August, a company whose beneficial owners are based in the tax haven initiated proceedings challenging the UK government. The previous week a arbitration panel in the United States was convened to hear it.

The company is suing the UK for the money it could have earned if the mine had been allowed to proceed. We have no clear indication how much this could amount to. What legal team is serving as its counsel in opposition to the state? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case to date, but it appears probable that he’ll use the tribunal to contest the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has filed a claim against Luxembourg for this reason, seeking sixteen billion dollars: an amount representing half nation's yearly budget. Part of the legal team acting for him in that case? Cherie Blair, wife of the former British prime minister.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over democratic administrations could be blocking the funds Ukraine critically depends on.

False Assurances and Mounting Threats

Politicians promised that these events wouldn’t happen. In 2014, a senior politician, championing the largest and riskiest of all such treaties, declared: “We’ve signed trade deal upon trade deal and there has never been a case in the past.” A consultant on this matter described campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about such legal actions. Warnings that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were greeted by scepticism.

That threat has now materialised. This year, fossil fuel and mining firms have filed a historic level of claims against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to prevent global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP