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What is your perceive our democratic process functions? Maybe something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law is upheld by the courts. Simple as that. Yet, that was how it used to work. No longer.

The Rise of Secret Courts

In the modern era, overseas companies, along with the billionaires that control them, can sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. The cases take place behind closed doors. In contrast to domestic courts, these panels allow no right of appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even enterprises operating from this country. Access is granted solely for businesses based overseas.

If a tribunal finds that a legislative action might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, running into billions.

These awards constitute not real financial harm but compensation the arbitrators determine the company might otherwise have made. The administration may have to rescind the measure. It will be hesitant to enacting future policies in that area, for fear of facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as companies take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the awards. The outcome? National sovereignty and democracy are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings taken by parliaments is that this clause has been incorporated – absent public approval, and often in conditions of total confidentiality – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

Last year, activists secured a significant win at the senior court. The justice ruled that schemes to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have zero effect on climate commitments. The Labour government subsequently revoked the permission the Tories had granted. Currently, this victory faces being overturned by an offshore tribunal accountable to exclusively the companies petitioning it.

In August, a corporate entity whose final controllers reside in the tax haven lodged a claim versus the UK government. Last week a tribunal in the United States was set up to consider the case.

This firm is suing the UK for the profits it could have earned if the mine had been allowed to proceed. We have little idea how much this sum represents. What legal team is acting on its behalf against the state? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a foreign company contests it through an secretive arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

Concurrently that the court on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against a small nation for this reason, demanding $16bn: an amount representing half government’s yearly income. Included in the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s delay in using frozen Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Costs

The public was told that these scenarios could not occur. In 2014, a government leader, advocating for the most significant and hazardous of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An expert on this topic described campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by these lawsuits. Predictions that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by general mockery.

That prediction has come to pass. In the current period, energy and resource corporations have initiated a unprecedented number of claims against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to stop climate breakdown. Companies have so far won vast sums by using ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP