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What is your reckon our democratic process operates? It could be similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. However, that’s how it once functioned. No longer.

The Emergence of Secret Courts

Today, overseas companies, along with the oligarchs that control them, can sue governments for the laws they pass, at private courts made up of corporate lawyers. These proceedings are held away from public scrutiny. Differing from national judiciaries, these bodies allow no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, including enterprises based in this country. The door is open solely for corporations based overseas.

Should an arbitration panel rules that a government measure might diminish the corporation’s projected profits, it may order compensation of vast sums, running into billions.

These awards are based not on tangible damages but money the panel members determine the company could potentially have made. The administration might be compelled to abandon its policy. It is deterred from passing future laws in that area, worried about incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of disputes are being brought, as firms observe each other, and investment funds finance suits in return for a cut of the settlements. The consequence? National sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the decisions taken by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of profound opacity – within bilateral investment treaties.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the High Court. The presiding officer ruled that schemes to open the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on national carbon targets. The new government later cancelled the licence the former government had granted. Now, this success is under threat by an foreign court reporting to exclusively the corporations petitioning it.

Last August, a firm whose final controllers are located in the tax haven filed a lawsuit versus the UK government. The previous week a tribunal in the US capital was convened to consider the case.

The company is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has little idea how much this sum represents. Which individual is representing it challenging the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the high court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official works for its behalf.

A Sanctions Lawsuit

On the same day that the court on the coalmine case was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK levied against him after the Russian aggression. He has previously initiated proceedings against another European state with similar intent, claiming $16bn: an amount representing half government’s annual revenue. Included in the counsel representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts contend that the EU’s delay in leveraging immobilised Russian assets as guarantee for its financial support package is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over democratic administrations could be blocking the funds Ukraine critically depends on.

False Assurances and Escalating Costs

The public was told that these scenarios could not occur. Previously, a senior politician, advocating for the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement upon trade deal and there has not been a problem in the past.” An expert on this issue accused activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations start to realise the authority they now possess, they will shift their focus from the poorer states to the strong ones” were greeted by scepticism.

That threat has come to pass. This year, energy and resource corporations have initiated a record number of claims against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent global warming. Companies have thus far won $114bn through ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP