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Can you reckon our democratic process operates? It could be similar to this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Emergence of Secret Courts

Nowadays, foreign corporations, and the wealthy individuals behind them, can sue elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are conducted away from public scrutiny. Unlike our courts, these panels provide no right of appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even businesses headquartered in this country. The door is open only to entities based overseas.

When a secret court determines that a law or policy might diminish the corporation’s expected profits, it may order damages of hundreds of millions of pounds, potentially billions.

These sums represent not real financial harm but money the tribunal officials conclude the company would perhaps have made. The state could be forced to rescind the measure. It will be hesitant to introducing similar legislation in that area, due to the risk of being sued.

A System Running Rampant

Historically high figures of disputes are being brought, as companies take cues from each other, and hedge funds fund legal actions in return for a portion of the takings. The result? Democratic sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the rulings taken by parliaments is that this clause has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

A year ago, a conservation group secured a significant win at the high court. The judge ruled that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine could have no impact on climate commitments. The new government subsequently revoked the licence the former government had granted. Now, this legal outcome is under threat by an offshore tribunal accountable to no one but the corporations bringing the case.

Last August, a corporate entity whose ultimate owners are based in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the US capital was convened to consider the case.

The company is suing the UK for the money it might have made if the mine had received permission to go ahead. The public has no idea how much this might be. Who is serving as its counsel challenging the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot the MP. The government enacts a policy, the domestic court validates it, then a international entity challenges it through an unaccountable private court, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the coalmine case was established, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he may employ the ISDS mechanism to fight the sanctions the UK levied against him following the war in Ukraine. He has started suing Luxembourg with similar intent, seeking sixteen billion dollars: half that government’s annual revenue. Included in the counsel acting for him in that case? Cherie Blair, wife of the previous PM.

International law scholars believe that the EU’s hesitation in using frozen Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Risks

The public was told that these events were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this topic labelled activists of “alarmism … in reality, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies begin to understand the influence bestowed upon them, they will turn their attention from the poorer states to the developed economies” were greeted by widespread derision.

That warning is now a reality. In the current period, energy and extraction companies have lodged a unprecedented number of claims against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – government attempts to halt climate breakdown. Corporations have thus far won $114bn by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP