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Can you perceive our democratic process works? Maybe something like this. We elect MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. End of story. Yet, that’s how it used to work. Those days are over.

The Advent of Secret Tribunals

Nowadays, overseas companies, or the oligarchs that control them, can sue nation states for the laws they pass, at private courts made up of commercial attorneys. The cases are conducted in secret. Differing from national judiciaries, these tribunals grant no right of appeal or legal review. You or I cannot take a case to them, and neither can our government, or even businesses headquartered in this country. They are open only to businesses operating from foreign soil.

If a tribunal determines that a government measure may compromise the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on real financial harm but compensation the panel members conclude the company might otherwise have made. The administration may have to drop the legislation. It is deterred from introducing similar legislation along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being filed, as companies observe each other, and investment funds fund legal actions in return for a share of the takings. The consequence? National sovereignty and democratic governance are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the decisions enacted by parliaments is that this stipulation has been written – absent public approval, and frequently under a climate of total confidentiality – inside trade treaties.

A Concrete Case: The UK Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The judge determined that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on climate commitments. The incoming administration subsequently revoked the permission the Tories had granted. Now, this legal outcome faces being overturned by an offshore tribunal accountable to no one but the companies bringing the case.

In August, a company whose beneficial owners reside in the tax haven filed a lawsuit challenging the UK government. The previous week a tribunal in the US capital was convened to consider the case.

The company is litigating against the UK for the profits it would have generated if the mine had been allowed to proceed. We have no idea how much this might be. What legal team is serving as its counsel in opposition to the state? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the high court validates it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case to date, but it appears probable that he may employ the arbitration process to fight the sanctions the UK enacted against him following the Russian aggression. He has previously started suing another European state for this reason, seeking sixteen billion dollars: an amount representing half government’s yearly budget. Part of the counsel representing him there? Cherie Blair, spouse of the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized state funds as collateral for its financial support package arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

False Assurances and Escalating Risks

Politicians promised that these events were not possible. Previously, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has never been a case in the past.” An adviser on this matter accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations needed to fear ISDS claims. Warnings that “once firms begin to understand the influence bestowed upon them, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That warning has now materialised. In the current period, fossil fuel and mining firms have filed a record number of claims against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – government attempts to halt climate breakdown. Companies have to date won vast sums through ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP