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Can you reckon our democratic process operates? Perhaps along the lines of this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills become law. Statutes is upheld by the courts. That's it. Well, that was how it once functioned. Those days are over.

The Advent of Shadow Courts

In the modern era, overseas companies, or the billionaires that control them, can sue nation states for the regulations they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, including enterprises operating from this country. They are open only to businesses operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s projected profits, it may order compensation of vast sums, even billions.

These awards are based not on tangible damages but compensation the arbitrators conclude the company might otherwise have made. The government may have to rescind the measure. It becomes discouraged from enacting future policies along the same lines, worried about facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being brought, as corporations learn from each other, and private equity fund legal actions in return for a portion of the settlements. The result? Sovereignty and democracy are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings enacted by parliaments is that this clause has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – inside trade treaties.

A Specific Example: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The presiding officer ruled that proposals to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the consent the Tories had issued. Today, this victory faces being overturned by an secret arbitration panel accountable to no one but the entities filing the suit.

Last August, a corporate entity whose final controllers reside in the Cayman Islands initiated proceedings versus the UK government. The previous week a arbitration panel in Washington DC was convened to hear it.

The company is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. The public has no clear indication how much this might be. What legal team is acting on its behalf challenging the state? An elected representative, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he’ll use the tribunal to fight the penalties the UK levied against him following the war in Ukraine. He has already filed a claim against Luxembourg for this reason, demanding sixteen billion dollars: half that nation's annual revenue. Part of the legal team on his side? a prominent lawyer, married to the previous PM.

Legal experts contend that the EU’s delay in using frozen oligarchs' funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states may be obstructing the finance Ukraine urgently requires.

Empty Promises and Growing Risks

The public was told that these events wouldn’t happen. Previously, a senior politician, advocating for the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a case in the past.” A consultant on this matter labelled campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries had to worry about such legal actions. Cautionary notes that “once firms grasp the influence bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.

That threat is now a reality. In the current period, fossil fuel and extraction companies have initiated a record number of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have thus far won $114bn by using ISDS, of which energy giants have obtained the majority. That represents the combined GDP