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How do you understand our democratic process operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes is upheld by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, along with the billionaires who own them, have the power to sue nation states for the policies they pass, at secret arbitration panels composed of business advocates. These proceedings take place behind closed doors. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even enterprises based in this country. The door is open only to corporations operating from foreign soil.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards are based not on actual losses but compensation the arbitrators conclude the company would perhaps have made. The administration may have to drop the legislation. It is hesitant to passing future laws of a similar nature, for fear of being sued.

A Process Running Rampant

Historically high figures of legal actions are being filed, as firms observe each other, and hedge funds fund legal actions for a share of a cut of the takings. The outcome? National sovereignty and democratic governance are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the decisions enacted by elected bodies is that this stipulation has been inserted – without democratic mandate, and often in a climate of total confidentiality – within bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The justice ruled that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The new government then withdrew the licence the Tories had issued. Now, this victory could be compromised by an secret arbitration panel answering to only the corporations bringing the case.

During August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. The previous week a dispute settlement body in the US capital was set up to consider the case.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. We have little idea how much this could amount to. What legal team is acting on its behalf challenging the state? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a overseas corporation disputes it through an secretive private court, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case to date, but it seems likely that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously initiated proceedings against another European state with similar intent, claiming sixteen billion dollars: half that state's yearly budget. Among the counsel representing him there? Cherie Blair, spouse of the ex-UK leader.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as security for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Growing Threats

We were assured that these events could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all such treaties, declared: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” A consultant on this topic labelled campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “once firms begin to understand the authority they’ve been granted, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That warning is now a reality. Recently, fossil fuel and resource corporations have filed a unprecedented number of cases against nations rich and poor, contesting – as in the case of the UK mine – government attempts to halt environmental catastrophe. Firms have thus far won vast sums by using ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP