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How do you understand our democratic process functions? Perhaps similar to this. We elect MPs. They vote on bills. When a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

In the modern era, international firms, along with the billionaires who own them, can sue elected administrations for the policies they pass, at private courts composed of commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these bodies allow no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. They are open solely for entities registered abroad.

If a tribunal determines that a government measure could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These sums represent not real financial harm but money the tribunal officials conclude the company could potentially have made. The state could be forced to drop the legislation. It will be deterred from passing future laws along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of legal actions are being filed, as companies learn from each other, and hedge funds fund legal actions in exchange for a share of the takings. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the choices taken by parliaments is that this stipulation has been written – without public consent, and frequently under a climate of extreme secrecy – within international trade agreements.

A Concrete Example: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the high court. The judge determined that plans to excavate the first major coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have no impact on national carbon targets. The new government then withdrew the permission the Tories had issued. Now, this legal outcome is under threat by an offshore tribunal answering to only the corporations filing the suit.

In August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in Washington DC was set up to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have no idea how much this sum represents. Who is acting on its behalf in opposition to the British government? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The state passes a law, the national judiciary validates it, then a overseas corporation contests it through an unaccountable private court, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the court on the coal mine dispute was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he may employ the arbitration process to contest the restrictions the UK imposed on him subsequent to the Russian aggression. He has already initiated proceedings against a small nation on these grounds, claiming sixteen billion dollars: an amount representing half state's yearly budget. Included in the legal team acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists argue that the EU’s procrastination in using frozen state funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Mounting Risks

Politicians promised that such things could not occur. Previously, a senior politician, championing the largest and riskiest of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An expert on this topic described critics of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations begin to understand the power they now possess, they will shift their focus from the weak nations to the wealthy nations” were greeted by general mockery.

That threat has come to pass. This year, oil and gas and mining firms have initiated a unprecedented number of cases against nations rich and poor, contesting – similar to the UK mine – official measures to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP