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Can you reckon our democratic process works? Perhaps something like this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills pass into law. Legislation are enforced by the courts. End of story. Yet, that was how it used to work. Those days are over.

The Emergence of Secret Courts

Nowadays, foreign corporations, along with the wealthy individuals who own them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels made up of corporate lawyers. These proceedings take place in secret. Unlike our courts, these bodies allow no right of appeal or judicial review. You or I are unable to file a case to them, nor can our government, including businesses based in this country. They are open exclusively to corporations operating from foreign soil.

When a secret court finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, potentially billions.

These sums represent not real financial harm but funds the tribunal officials decide the company could potentially have made. The administration may have to drop the legislation. It will be discouraged from passing future laws in that area, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of legal actions are being brought, as corporations learn from each other, and investment funds fund legal actions in exchange for a portion of the takings. The result? National sovereignty and democratic governance are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the rulings made by legislatures is that this provision has been written – without public consent, and frequently under a climate of extreme secrecy – inside trade treaties.

A Specific Example: The UK Coalmine

A year ago, environmental campaigners won a great victory at the High Court. The judge ruled that plans to excavate the first new deep coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have no impact on climate commitments. The Labour government subsequently revoked the consent the Tories had granted. Today, this victory is under threat by an secret arbitration panel reporting to no one but the corporations filing the suit.

Last August, a corporate entity whose final controllers are located in the Cayman Islands lodged a claim versus the UK government. The previous week a tribunal in the US capital was established to consider the case.

The company is litigating against the UK for the money it would have generated if the mine had been permitted to go ahead. We have little idea how much this could amount to. Which individual is representing it against the state? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court validates it, then a international entity disputes it through an secretive arbitration panel, and a elected official works for its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case so far, but it appears probable that he may employ the arbitration process to challenge the sanctions the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against a small nation on these grounds, demanding $16bn: half that government’s annual revenue. Included in the legal team on his side? the wife of a former prime minister, married to the previous PM.

Trade specialists contend that the EU’s procrastination in utilising seized Russian assets as collateral for its loan to Ukraine is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Costs

We were assured that these scenarios could not occur. In 2014, a senior politician, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this matter described activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “once firms grasp the influence bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction is now a reality. This year, energy and resource corporations have lodged a record number of claims against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to stop environmental catastrophe. Corporations have so far won $114bn through ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP