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Can you perceive our democratic process works? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. Simple as that. However, that used to be how it once functioned. Not anymore.

The Advent of Secret Courts

Nowadays, foreign corporations, along with the wealthy individuals behind them, have the power to sue governments for the laws they pass, at private courts composed of business advocates. The cases are held behind closed doors. Differing from national judiciaries, these bodies provide no avenue for appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, including businesses operating from this country. Access is granted solely for corporations operating from foreign soil.

When a secret court rules that a legislative action might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions, even billions.

These awards constitute not real financial harm but compensation the panel members determine the company could potentially have made. The government might be compelled to abandon its policy. It will be discouraged from introducing similar legislation along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Historically high figures of cases are being initiated, as companies learn from each other, and hedge funds fund legal actions in exchange for a cut of the settlements. The consequence? Democratic sovereignty and popular rule are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the choices enacted by legislatures is that this provision has been inserted – absent public approval, and typically amid conditions of total confidentiality – inside trade treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the high court. The presiding officer found that plans to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have zero effect on national carbon targets. The Labour government later cancelled the permission the Tories had approved. Now, this legal outcome faces being overturned by an offshore tribunal reporting to no one but the entities bringing the case.

Last August, a company whose final controllers reside in the offshore financial centre initiated proceedings against the UK government. Last week a tribunal in the US capital was convened to hear it.

The company is suing the UK for the revenue it might have made if the mine had received permission to commence operations. The public has no idea how much this might be. Who is serving as its counsel challenging the state? A member of parliament, and former attorney-general in the previous government, the noted patriot the MP. The state makes a decision, the high court validates it, then a foreign company contests it through an secretive offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coalmine case was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the restrictions the UK levied against him following the Russian aggression. He has previously started suing a small nation for this reason, demanding $16bn: half that government’s yearly income. Among the counsel acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that these events were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this topic accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “once firms begin to understand the influence bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by scepticism.

That prediction has now materialised. This year, energy and extraction companies have filed a record number of suits against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to halt environmental catastrophe. Corporations have thus far won $114bn by using ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP