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How do you understand our democratic process operates? Perhaps something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. However, that was how it operated in the past. No longer.

The Advent of Secret Tribunals

Today, international firms, or the wealthy individuals that control them, can sue elected administrations for the laws they pass, at private courts made up of business advocates. These proceedings take place behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including businesses based in this country. Access is granted solely for businesses registered abroad.

When a secret court finds that a law or policy might diminish the corporation’s projected profits, it can award financial penalties of hundreds of millions, potentially billions.

These awards constitute not actual losses but funds the panel members determine the company would perhaps have made. The administration could be forced to abandon its policy. It becomes discouraged from passing future laws of a similar nature, worried about facing litigation.

A Process Growing Exponentially

Unprecedented levels of cases are being filed, as companies take cues from each other, and investment funds fund legal actions for a share of a portion of the takings. The outcome? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the rulings taken by elected bodies is that this stipulation has been inserted – without democratic mandate, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

Last year, a conservation group won a great victory at the High Court. The judge ruled that schemes to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The Labour government then withdrew the licence the former government had approved. Currently, this success is under threat by an secret arbitration panel accountable to exclusively the entities filing the suit.

During August, a company whose final controllers reside in the Cayman Islands lodged a claim challenging the UK government. Recently a tribunal in the United States was convened to adjudicate on it.

The company is suing the UK for the money it might have made if the mine had received permission to proceed. The public has no idea how much this might be. Who is representing it against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The state makes a decision, the high court validates it, then a international entity contests it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it is highly possible that he may employ the tribunal to fight the penalties the UK levied against him after the Russian aggression. He has started suing a small nation on these grounds, seeking a colossal sum: equivalent to half of nation's yearly income. Among the counsel representing him there? the wife of a former prime minister, married to the previous PM.

Legal experts contend that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its financial support package is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that such things were not possible. Years ago, a former prime minister, championing the most significant and hazardous of all such treaties, told us: “We’ve signed investment treaty upon trade deal and there has not been a case in the past.” A consultant on this topic described campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “once firms begin to understand the influence they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were greeted by general mockery.

That warning has come to pass. This year, oil and gas and resource corporations have filed a unprecedented number of suits against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to prevent global warming. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP