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How do you understand our democratic process works? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. However, that’s how it used to work. Those days are over.

The Advent of Secret Tribunals

Nowadays, foreign corporations, or the wealthy individuals that control them, are able to litigate against governments for the policies they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are conducted in secret. In contrast to domestic courts, these bodies provide no right of appeal or legal review. You or I are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted only to corporations registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions, potentially billions.

These awards represent not tangible damages but compensation the panel members conclude the company would perhaps have made. The government might be compelled to abandon its policy. It will be discouraged from enacting future policies in that area, for fear of facing litigation.

A Process Growing Exponentially

Record numbers of cases are being brought, as companies learn from each other, and private equity bankroll lawsuits in exchange for a share of the takings. The result? National sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the decisions made by legislatures is that this stipulation has been written – absent public approval, and frequently under an atmosphere of extreme secrecy – within bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no impact on our carbon budgets. The Labour government later cancelled the consent the previous administration had granted. Today, this success faces being overturned by an foreign court answering to no one but the entities filing the suit.

During August, a company whose ultimate owners reside in the Cayman Islands initiated proceedings against the UK government. Last week a tribunal in the US capital was set up to hear it.

The company is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. Citizens have no clear indication how much this might be. Which individual is representing it against the UK administration? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

The Russian Challenge

On the same day that the panel on the coalmine case was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he’ll use the arbitration process to contest the sanctions the UK imposed on him after the Russian aggression. He has already started suing Luxembourg on these grounds, demanding $16bn: an amount representing half state's yearly income. Included in the counsel on his side? the wife of a former prime minister, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in using frozen Russian assets as security for its financial support package stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Risks

We were assured that these scenarios wouldn’t happen. Years ago, a former prime minister, championing the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” A consultant on this issue accused activists of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “once firms start to realise the power they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were met with scepticism.

That prediction has come to pass. This year, energy and resource corporations have initiated a unprecedented number of suits against nations rich and poor, opposing – as in the case of the UK mine – state efforts to halt climate breakdown. Firms have so far won $114bn by using ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP