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What is your reckon our democratic process functions? It could be similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. Legislation is upheld by the courts. That's it. Yet, that’s how it operated in the past. Those days are over.

The Emergence of Secret Courts

Today, international firms, or the wealthy individuals who own them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings take place away from public scrutiny. Unlike our courts, these bodies allow no avenue for appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. The door is open only to businesses based overseas.

If a tribunal determines that a legislative action could harm the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

These sums are based not on real financial harm but funds the arbitrators conclude the company might otherwise have made. The government could be forced to rescind the measure. It is discouraged from enacting future policies along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as corporations observe each other, and investment funds fund legal actions in exchange for a cut of the awards. The outcome? National sovereignty and democratic governance are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the rulings taken by legislatures is that this provision has been inserted – absent public approval, and frequently under an atmosphere of total confidentiality – within trade treaties.

A Real-World Case: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the High Court. The presiding officer ruled that plans to open the first major coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have had no consequence on national carbon targets. The incoming administration subsequently revoked the licence the former government had issued. Now, this legal outcome is under threat by an secret arbitration panel accountable to only the entities bringing the case.

During August, a firm whose final controllers are based in the Cayman Islands filed a lawsuit against the UK government. Last week a arbitration panel in the United States was established to consider the case.

This firm is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. The public has little idea how much this sum represents. Which individual is acting on its behalf against the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot the MP. The state makes a decision, the national judiciary supports it, then a foreign company disputes it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Case

Concurrently that the court on the coalmine case was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case to date, but it appears probable that he will utilise the arbitration process to contest the restrictions the UK enacted against him subsequent to the Russian aggression. He has initiated proceedings against another European state for this reason, demanding a colossal sum: half that nation's annual revenue. Included in the counsel on his side? a prominent lawyer, married to the ex-UK leader.

International law scholars contend that the EU’s hesitation in utilising seized state funds as collateral for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations may be obstructing the funds Ukraine desperately needs.

Empty Promises and Mounting Costs

Politicians promised that such things were not possible. Years ago, a government leader, championing the largest and riskiest of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An expert on this topic accused activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by such legal actions. Predictions that “as corporations begin to understand the authority they now possess, they will redirect their efforts from the weak nations to the strong ones” were greeted by widespread derision.

That warning is now a reality. This year, oil and gas and resource corporations have lodged a unprecedented number of claims against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Corporations have so far won $114bn by using ISDS, of which energy giants have obtained the majority. That represents the combined GDP