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Can you understand our democratic process operates? Perhaps similar to this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills become law. The law is upheld by the courts. End of story. However, that was how it operated in the past. No longer.

The Advent of Secret Tribunals

Nowadays, overseas companies, and the wealthy individuals behind them, can sue governments for the laws they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are held behind closed doors. In contrast to domestic courts, these bodies provide no avenue for appeal or legal review. You or I are unable to file a case to them, and neither can our government, including businesses based in this country. They are open exclusively to businesses operating from foreign soil.

When a secret court rules that a government measure could harm the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, running into billions.

These sums represent not real financial harm but compensation the panel members decide the company might otherwise have made. The administration might be compelled to drop the legislation. It is hesitant to passing future laws along the same lines, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as companies learn from each other, and investment funds bankroll lawsuits in return for a cut of the awards. The consequence? Democratic sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the decisions enacted by legislatures is that this clause has been incorporated – without public consent, and frequently under conditions of profound opacity – within international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The justice ruled that plans to excavate the first major coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have zero effect on national carbon targets. The Labour government subsequently revoked the licence the former government had issued. Today, this success could be compromised by an foreign court answering to only the corporations petitioning it.

Last August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings challenging the UK government. Last week a dispute settlement body in the US capital was set up to hear it.

This firm is litigating against the UK for the revenue it would have generated if the mine had been permitted to go ahead. We have little idea how much this might be. Which individual is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Challenge

On the same day that the panel on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to fight the penalties the UK enacted against him following the Russian aggression. He has previously started suing a small nation with similar intent, seeking $16bn: equivalent to half of nation's yearly income. Included in the counsel on his side? Cherie Blair, spouse of the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over elected governments might be preventing the finance Ukraine desperately needs.

Empty Promises and Escalating Risks

Politicians promised that these events could not occur. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal after trade deal and there has not been a case in the past.” A consultant on this issue described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about ISDS claims. Warnings that “once firms begin to understand the influence they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That threat is now a reality. Recently, fossil fuel and mining firms have lodged a record number of suits against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Firms have so far won $114bn by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP