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Can you perceive our democratic process operates? Maybe similar to this. We elect MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. That's it. However, that’s how it used to work. No longer.

The Emergence of Secret Courts

Nowadays, overseas companies, along with the oligarchs that control them, are able to litigate against nation states for the laws they pass, at private courts staffed by business advocates. Such disputes take place behind closed doors. Differing from national judiciaries, these tribunals grant no right of appeal or judicial review. The general public cannot take a case to them, just as our government, or even companies based in this country. They are open only to corporations operating from foreign soil.

When a secret court rules that a legislative action could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These awards constitute not tangible damages but funds the arbitrators conclude the company would perhaps have made. The administration might be compelled to abandon its policy. It will be discouraged from passing future laws of a similar nature, due to the risk of being sued.

A System Running Rampant

Historically high figures of cases are being filed, as firms observe each other, and hedge funds fund legal actions in return for a portion of the awards. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings enacted by elected bodies is that this provision has been written – absent public approval, and often in a climate of total confidentiality – into international trade agreements.

A Concrete Example: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer ruled that plans to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration later cancelled the licence the previous administration had granted. Now, this success could be compromised by an offshore tribunal reporting to exclusively the corporations filing the suit.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. Last week a arbitration panel in the US capital was set up to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had been permitted to go ahead. The public has little idea how much this might be. Who is acting on its behalf in opposition to the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government makes a decision, the high court validates it, then a foreign company challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the sanctions the UK imposed on him after the Russian aggression. He has initiated proceedings against a small nation with similar intent, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Included in the legal team on his side? Cherie Blair, wife of the previous PM.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as guarantee for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments could be blocking the funds Ukraine desperately needs.

Misleading Claims and Mounting Costs

We were assured that such things were not possible. In 2014, a senior politician, promoting the largest and riskiest of all investment pacts, stated: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this issue accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with widespread derision.

That prediction is now a reality. In the current period, fossil fuel and resource corporations have filed a historic level of cases against nations rich and poor, challenging – like the example of the UK mine – official measures to halt environmental catastrophe. Firms have thus far won vast sums via ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP