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What is your understand our democratic process operates? Maybe something like this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Rise of Secret Courts

In the modern era, foreign corporations, and the billionaires behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these panels provide no right of appeal or judicial review. You or I cannot take a case to them, just as our government, or even businesses based in this country. They are open only to businesses operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums are based not on tangible damages but money the tribunal officials determine the company might otherwise have made. The administration could be forced to drop the legislation. It is hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of legal actions are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The result? Democratic sovereignty and democracy are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the decisions made by parliaments is that this provision has been inserted – without democratic mandate, and often in conditions of total confidentiality – inside bilateral investment treaties.

A Real-World Case: The UK Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The presiding officer found that plans to dig the first major coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have had no consequence on climate commitments. The new government then withdrew the licence the former government had issued. Currently, this legal outcome could be compromised by an secret arbitration panel reporting to only the corporations filing the suit.

During August, a corporate entity whose final controllers are based in the tax haven initiated proceedings against the UK government. The previous week a dispute settlement body in Washington DC was set up to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. The public has no idea how much this sum represents. Which individual is serving as its counsel against the British government? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the domestic court upholds it, then a international entity disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case to date, but it appears probable that he’ll use the arbitration process to challenge the sanctions the UK enacted against him following the war in Ukraine. He has already started suing a small nation with similar intent, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Among the legal team representing him there? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s hesitation in utilising seized state funds as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states may be obstructing the finance Ukraine urgently requires.

Empty Promises and Growing Risks

We were assured that such things were not possible. Previously, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and there has not been a case in the past.” An expert on this issue labelled critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “as corporations grasp the power they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were dismissed with general mockery.

That prediction has come to pass. This year, oil and gas and extraction companies have initiated a record number of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – state efforts to stop environmental catastrophe. Corporations have thus far won vast sums via ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP