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How do you perceive our democratic process works? Maybe something like this. We elect MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. However, that was how it once functioned. Not anymore.

The Rise of Shadow Tribunals

Nowadays, overseas companies, and the oligarchs behind them, have the power to sue governments for the policies they pass, at private courts staffed by corporate lawyers. The cases are conducted away from public scrutiny. Unlike our courts, these panels grant no right of appeal or judicial review. You or I cannot take a case to them, and neither can our government, including enterprises operating from this country. They are open only to entities operating from foreign soil.

When a secret court determines that a government measure could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions, running into billions.

These sums are based not on tangible damages but funds the arbitrators determine the company would perhaps have made. The administration might be compelled to rescind the measure. It is deterred from passing future laws in that area, for fear of being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being brought, as firms observe each other, and private equity bankroll lawsuits for a share of a portion of the takings. The outcome? Sovereignty and democracy are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices enacted by elected bodies is that this clause has been written – without democratic mandate, and typically amid a climate of extreme secrecy – into trade treaties.

A Concrete Instance: The UK Coalmine

Last year, a conservation group won a great victory at the high court. The judge found that plans to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the permission the Tories had issued. Today, this legal outcome could be compromised by an offshore tribunal answering to no one but the companies bringing the case.

Last August, a company whose beneficial owners are based in the Cayman Islands lodged a claim versus the UK government. Last week a dispute settlement body in Washington DC was set up to adjudicate on it.

This firm is suing the UK for the profits it might have made if the mine had received permission to commence operations. Citizens have little idea how much this could amount to. What legal team is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a international entity challenges it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coalmine case was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he will utilise the tribunal to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously started suing a small nation on these grounds, seeking a colossal sum: equivalent to half of government’s yearly income. Among the counsel representing him there? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments might be preventing the money Ukraine critically depends on.

Empty Promises and Growing Costs

We were assured that such things wouldn’t happen. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this matter accused activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries had to worry about such legal actions. Predictions that “when companies grasp the power they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That warning has come to pass. This year, energy and mining firms have initiated a record number of suits against nations rich and poor, challenging – as in the case of the UK mine – government attempts to stop environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP