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What is your understand our democratic process works? Perhaps similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Rise of Shadow Courts

In the modern era, international firms, and the billionaires behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels composed of corporate lawyers. Such disputes take place in secret. In contrast to domestic courts, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, or even companies operating from this country. The door is open solely for entities registered abroad.

Should an arbitration panel finds that a legislative action could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

This compensation constitute not actual losses but money the tribunal officials determine the company could potentially have made. The government may have to drop the legislation. It will be hesitant to introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms observe each other, and private equity finance suits in return for a portion of the takings. The result? Sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the decisions enacted by legislatures is that this clause has been inserted – without democratic mandate, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coalmine

Last year, a conservation group achieved a major legal triumph at the High Court. The justice determined that proposals to open the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no impact on climate commitments. The new government subsequently revoked the permission the former government had granted. Now, this legal outcome is under threat by an offshore tribunal answering to no one but the entities petitioning it.

In August, a firm whose final controllers are located in the tax haven initiated proceedings against the UK government. Last week a tribunal in the United States was established to consider the case.

The company is suing the UK for the profits it could have earned if the mine had received permission to proceed. Citizens have no clear indication how much this might be. What legal team is acting on its behalf challenging the British government? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a international entity contests it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coalmine case was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it is highly possible that he will utilise the arbitration process to fight the restrictions the UK enacted against him after the Russian aggression. He has already filed a claim against a small nation on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly income. Part of the legal team on his side? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists believe that the EU’s procrastination in using frozen state funds as security for its aid for Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Growing Costs

The public was told that these events were not possible. Previously, a government leader, championing the most significant and hazardous of all such treaties, told us: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this issue accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “when companies grasp the influence they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were met with widespread derision.

That warning is now a reality. This year, fossil fuel and resource corporations have filed a historic level of suits against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP