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Can you reckon our democratic process works? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills become law. The law is maintained by the courts. That's it. However, that’s how it used to work. Those days are over.

The Advent of Secret Courts

Nowadays, overseas companies, or the oligarchs who own them, can sue nation states for the regulations they pass, at offshore tribunals composed of business advocates. The cases are conducted away from public scrutiny. In contrast to domestic courts, these panels grant no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. Access is granted exclusively to businesses based overseas.

Should an arbitration panel finds that a legislative action could harm the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but compensation the arbitrators determine the company could potentially have made. The administration may have to rescind the measure. It is hesitant to introducing similar legislation in that area, worried about being sued.

A System Spiralling Out of Control

Record numbers of cases are being filed, as companies observe each other, and hedge funds finance suits in exchange for a portion of the settlements. The consequence? Democratic sovereignty and democratic governance are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the decisions enacted by elected bodies is that this stipulation has been written – absent public approval, and frequently under a climate of profound opacity – inside trade treaties.

A Specific Instance: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice found that plans to open the first deep coalmine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the permission the Tories had approved. Today, this victory could be compromised by an foreign court reporting to no one but the corporations bringing the case.

During August, a firm whose final controllers reside in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the US capital was established to consider the case.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. Citizens have no clear indication how much this might be. What legal team is representing it against the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a international entity disputes it through an secretive offshore tribunal, and a elected official represents its behalf.

The Russian Case

On the same day that the tribunal on the coalmine case was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case at present, but it is highly possible that he’ll use the arbitration process to fight the sanctions the UK enacted against him subsequent to the war in Ukraine. He has previously initiated proceedings against another European state on these grounds, seeking a colossal sum: an amount representing half state's yearly budget. Among the counsel acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists contend that the EU’s hesitation in using frozen Russian assets as security for its financial support package arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

We were assured that these events were not possible. In 2014, a government leader, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty upon trade deal and we have never seen a case in the past.” An adviser on this topic accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries should be concerned by these lawsuits. Warnings that “as corporations start to realise the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were met with general mockery.

That prediction has come to pass. This year, fossil fuel and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Firms have so far won $114bn by using ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP