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What is your reckon our democratic process functions? It could be similar to this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. Simple as that. However, that was how it operated in the past. Not anymore.

The Advent of Secret Courts

In the modern era, overseas companies, along with the oligarchs who own them, are able to litigate against governments for the laws they pass, at private courts made up of business advocates. Such disputes are conducted behind closed doors. Differing from national judiciaries, these bodies allow no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises operating from this country. The door is open solely for corporations registered abroad.

If a tribunal rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of vast sums, running into billions.

This compensation are based not on actual losses but money the arbitrators decide the company might otherwise have made. The government might be compelled to rescind the measure. It is hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being brought, as corporations learn from each other, and investment funds fund legal actions for a share of a share of the awards. The result? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the decisions enacted by parliaments is that this provision has been inserted – without democratic mandate, and typically amid conditions of profound opacity – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge determined that schemes to open the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had zero effect on national carbon targets. The new government then withdrew the permission the former government had granted. Today, this victory is under threat by an foreign court answering to no one but the corporations bringing the case.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. Last week a arbitration panel in the United States was established to hear it.

This firm is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. The public has little idea how much this sum represents. Which individual is serving as its counsel in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The state passes a law, the domestic court validates it, then a foreign company challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case so far, but it is highly possible that he’ll use the tribunal to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has already filed a claim against a small nation for this reason, demanding a colossal sum: equivalent to half of state's yearly budget. Part of the legal team on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Growing Threats

We were assured that such things were not possible. Previously, a government leader, promoting the most significant and hazardous of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” An adviser on this issue described activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “once firms start to realise the authority they’ve been granted, they will turn their attention from the weak nations to the developed economies” were dismissed with widespread derision.

That threat is now a reality. This year, oil and gas and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – government attempts to halt climate breakdown. Firms have to date won vast sums via ISDS, of which energy giants have obtained the majority. That represents the combined GDP