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How do you understand our democratic process operates? Perhaps similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Emergence of Secret Courts

Nowadays, foreign corporations, and the oligarchs who own them, have the power to sue nation states for the regulations they pass, at offshore tribunals composed of commercial attorneys. The cases take place behind closed doors. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies operating from this country. Access is granted solely for corporations operating from foreign soil.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it can award damages of hundreds of millions, potentially billions.

These awards are based not on real financial harm but funds the tribunal officials decide the company might otherwise have made. The administration might be compelled to abandon its policy. It will be deterred from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as firms observe each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The outcome? Sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions taken by legislatures is that this provision has been inserted – without democratic mandate, and frequently under conditions of total confidentiality – into trade treaties.

A Real-World Example: The Whitehaven Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer found that schemes to open the first deep coalmine in the UK for three decades, in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The incoming administration later cancelled the consent the former government had granted. Currently, this legal outcome could be compromised by an foreign court answering to no one but the entities bringing the case.

Last August, a company whose ultimate owners are located in the Cayman Islands lodged a claim versus the UK government. The previous week a dispute settlement body in Washington DC was set up to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had been allowed to commence operations. We have no clear indication how much this might be. Who is serving as its counsel challenging the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Simultaneously that the tribunal on the coalmine case was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case to date, but it seems likely that he’ll use the ISDS mechanism to challenge the sanctions the UK levied against him after the invasion of Ukraine. He has initiated proceedings against another European state for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Among the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over democratic administrations may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Costs

Politicians promised that these events were not possible. Years ago, a senior politician, promoting the most significant and hazardous of all investment pacts, stated: “Britain has agreed to investment treaty upon trade deal and there has not been a issue in the past.” A consultant on this matter described activists of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Cautionary notes that “once firms start to realise the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were met with general mockery.

That prediction is now a reality. Recently, fossil fuel and extraction companies have filed a historic level of claims against nations across the economic spectrum, opposing – similar to the Whitehaven project – state efforts to halt climate breakdown. Corporations have thus far won vast sums via ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP