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Can you perceive our democratic process functions? It could be something like this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Advent of Secret Tribunals

Nowadays, foreign corporations, and the wealthy individuals behind them, have the power to sue elected administrations for the laws they pass, at offshore tribunals made up of business advocates. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies allow no right of appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even businesses headquartered in this country. The door is open exclusively to corporations based overseas.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, even billions.

These sums are based not on actual losses but compensation the arbitrators decide the company could potentially have made. The administration could be forced to abandon its policy. It is deterred from enacting future policies in that area, due to the risk of being sued.

A System Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations learn from each other, and private equity bankroll lawsuits for a share of a share of the awards. The outcome? Democratic sovereignty and democracy are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the decisions taken by parliaments is that this provision has been written – without democratic mandate, and often in a climate of profound opacity – within trade treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the high court. The judge found that plans to open the first major coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine could have zero effect on our carbon budgets. The incoming administration subsequently revoked the licence the Tories had issued. Now, this success is under threat by an offshore tribunal reporting to only the companies petitioning it.

Last August, a company whose beneficial owners are located in the tax haven filed a lawsuit versus the UK government. The previous week a tribunal in the US capital was set up to consider the case.

This firm is suing the UK for the money it might have made if the mine had been permitted to commence operations. The public has no idea how much this might be. What legal team is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coalmine case was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case at present, but it is highly possible that he will utilise the tribunal to fight the restrictions the UK levied against him following the Russian aggression. He has previously initiated proceedings against a small nation with similar intent, claiming a colossal sum: an amount representing half nation's yearly budget. Among the counsel acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts believe that the EU’s procrastination in leveraging immobilised state funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the funds Ukraine urgently requires.

Empty Promises and Growing Costs

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, promoting the largest and riskiest of all these agreements, stated: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this issue described campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning has come to pass. This year, fossil fuel and mining firms have filed a unprecedented number of claims against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – official measures to stop environmental catastrophe. Firms have so far won $114bn through ISDS, of which energy giants have secured the majority. That equates to the combined GDP