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Can you reckon our democratic process functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Advent of Secret Courts

In the modern era, foreign corporations, or the wealthy individuals that control them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of business advocates. The cases are conducted behind closed doors. Differing from national judiciaries, these panels allow no avenue for appeal or judicial review. You or I are unable to file a case to them, nor can our government, including businesses based in this country. The door is open exclusively to entities registered abroad.

When a secret court finds that a legislative action could harm the corporation’s projected profits, it has the power to grant damages of vast sums, running into billions.

These awards are based not on actual losses but compensation the panel members conclude the company could potentially have made. The administration might be compelled to rescind the measure. It will be hesitant to introducing similar legislation in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Historically high figures of disputes are being filed, as companies learn from each other, and private equity finance suits for a share of a portion of the awards. The result? Democratic sovereignty and democratic governance are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the choices enacted by elected bodies is that this provision has been written – without democratic mandate, and often in conditions of profound opacity – within international trade agreements.

A Real-World Case: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the High Court. The judge found that proposals to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have no impact on climate commitments. The new government then withdrew the permission the previous administration had approved. Today, this legal outcome faces being overturned by an offshore tribunal answering to no one but the entities bringing the case.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings versus the UK government. The previous week a tribunal in the United States was convened to consider the case.

The company is suing the UK for the profits it would have generated if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. What legal team is representing it challenging the British government? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the national judiciary validates it, then a international entity challenges it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it seems likely that he may employ the ISDS mechanism to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has already started suing a small nation with similar intent, demanding $16bn: half that state's yearly income. Among the legal team acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Threats

We were assured that such things could not occur. Previously, a government leader, promoting the largest and riskiest of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” An adviser on this topic accused campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations should be concerned by ISDS claims. Predictions that “once firms begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That warning has come to pass. This year, fossil fuel and resource corporations have lodged a historic level of cases against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to prevent climate breakdown. Firms have to date won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP