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Can you reckon our democratic process operates? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that used to be how it operated in the past. No longer.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, along with the billionaires that control them, can sue elected administrations for the policies they pass, at private courts staffed by corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. You or I are unable to file a case to them, and neither can our government, including businesses based in this country. They are open only to corporations registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions, even billions.

These awards are based not on actual losses but money the panel members conclude the company might otherwise have made. The state might be compelled to abandon its policy. It will be hesitant to introducing similar legislation along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as firms observe each other, and private equity finance suits in return for a portion of the takings. The consequence? Sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the decisions made by legislatures is that this clause has been incorporated – without public consent, and typically amid conditions of total confidentiality – inside trade treaties.

A Concrete Example: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The justice ruled that plans to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The incoming administration then withdrew the permission the previous administration had approved. Currently, this victory faces being overturned by an offshore tribunal accountable to no one but the corporations bringing the case.

During August, a company whose beneficial owners reside in the Cayman Islands lodged a claim challenging the UK government. Recently a dispute settlement body in Washington DC was set up to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to go ahead. Citizens have little idea how much this might be. What legal team is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a overseas corporation contests it through an undemocratic private court, and a member of our parliament works for its behalf.

The Russian Case

On the same day that the panel on the coalmine case was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case so far, but it seems likely that he may employ the arbitration process to contest the penalties the UK enacted against him following the war in Ukraine. He has previously started suing a small nation with similar intent, claiming sixteen billion dollars: half that state's yearly income. Part of the lawyers on his side? a prominent lawyer, married to the ex-UK leader.

International law scholars argue that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over democratic administrations might be preventing the money Ukraine critically depends on.

False Assurances and Mounting Risks

Politicians promised that such things could not occur. Previously, a former prime minister, championing the largest and riskiest of all investment pacts, stated: “The UK has signed trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this matter labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Predictions that “once firms grasp the authority they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That warning has come to pass. Recently, energy and resource corporations have filed a unprecedented number of claims against nations rich and poor, challenging – as in the case of the UK mine – state efforts to prevent environmental catastrophe. Firms have thus far won vast sums through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP