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What is your understand our democratic process operates? Perhaps something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills pass into law. The law is maintained by the courts. End of story. However, that’s how it used to work. No longer.

The Emergence of Secret Courts

Today, overseas companies, and the billionaires who own them, have the power to sue nation states for the regulations they pass, at private courts made up of commercial attorneys. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, or even businesses headquartered in this country. They are open only to corporations registered abroad.

If a tribunal determines that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions of pounds, running into billions.

This compensation represent not actual losses but funds the panel members conclude the company could potentially have made. The state may have to abandon its policy. It is deterred from passing future laws along the same lines, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations observe each other, and investment funds bankroll lawsuits in exchange for a share of the takings. The consequence? Democratic sovereignty and democracy are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the choices enacted by legislatures is that this clause has been inserted – without public consent, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Instance: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The judge found that plans to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The new government then withdrew the permission the Tories had granted. Now, this legal outcome could be compromised by an foreign court reporting to only the corporations bringing the case.

During August, a company whose final controllers are based in the Cayman Islands lodged a claim challenging the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The company is litigating against the UK for the money it would have generated if the mine had received permission to proceed. The public has little idea how much this might be. What legal team is representing it challenging the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Challenge

On the same day that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case so far, but it appears probable that he’ll use the ISDS mechanism to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has initiated proceedings against Luxembourg on these grounds, claiming a colossal sum: half that government’s annual revenue. Included in the lawyers representing him there? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s delay in utilising seized Russian assets as security for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Risks

Politicians promised that these events could not occur. In 2014, a senior politician, promoting the largest and riskiest of all these agreements, declared: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this matter accused activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Warnings that “when companies grasp the influence they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were met with scepticism.

That threat has now materialised. Recently, oil and gas and mining firms have lodged a historic level of cases against nations across the economic spectrum, contesting – like the example of the UK mine – state efforts to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP