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What is your reckon our democratic process works? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. Simple as that. Yet, that’s how it used to work. No longer.

The Emergence of Secret Courts

In the modern era, international firms, along with the billionaires behind them, have the power to sue elected administrations for the policies they pass, at offshore tribunals made up of business advocates. These proceedings take place behind closed doors. In contrast to domestic courts, these panels allow no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, including businesses headquartered in this country. Access is granted only to businesses registered abroad.

If a tribunal finds that a legislative action might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

These sums represent not tangible damages but funds the tribunal officials conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It will be hesitant to passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of disputes are being filed, as firms take cues from each other, and investment funds finance suits for a share of a share of the takings. The outcome? National sovereignty and democracy are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the rulings made by elected bodies is that this stipulation has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – into trade treaties.

A Real-World Example: The UK Coalmine

Last year, activists won a great victory at the High Court. The presiding officer found that plans to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine could have zero effect on climate commitments. The new government then withdrew the consent the previous administration had approved. Today, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations filing the suit.

During August, a firm whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Recently a arbitration panel in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to proceed. We have little idea how much this could amount to. What legal team is serving as its counsel challenging the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The administration passes a law, the domestic court validates it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

The Russian Challenge

Simultaneously that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know little of the case so far, but it is highly possible that he will utilise the tribunal to contest the sanctions the UK enacted against him after the Russian aggression. He has already initiated proceedings against a small nation on these grounds, demanding sixteen billion dollars: equivalent to half of nation's yearly income. Part of the legal team representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts believe that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that these scenarios were not possible. In 2014, a senior politician, promoting the biggest and most dangerous of all such treaties, told us: “The UK has signed investment treaty upon trade deal and there has not been a case in the past.” An adviser on this matter labelled campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear ISDS claims. Predictions that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the weak nations to the strong ones” were dismissed with widespread derision.

That warning has now materialised. In the current period, energy and extraction companies have filed a record number of suits against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to stop global warming. Companies have so far won $114bn by using ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP