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Can you understand our democratic process works? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, along with the wealthy individuals that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are conducted behind closed doors. Unlike our courts, these tribunals provide no avenue for appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even companies operating from this country. Access is granted solely for corporations operating from foreign soil.

When a secret court finds that a law or policy might diminish the corporation’s expected profits, it may order damages of hundreds of millions, potentially billions.

These sums represent not tangible damages but compensation the panel members decide the company would perhaps have made. The administration could be forced to abandon its policy. It is hesitant to enacting future policies of a similar nature, worried about facing litigation.

A Process Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies take cues from each other, and private equity finance suits in exchange for a portion of the takings. The outcome? Democratic sovereignty and popular rule are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the choices enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and often in a climate of total confidentiality – into trade treaties.

A Specific Instance: The Cumbrian Coalmine

Last year, activists secured a significant win at the senior court. The justice ruled that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine could have no impact on climate commitments. The Labour government then withdrew the permission the former government had issued. Now, this victory is under threat by an secret arbitration panel reporting to no one but the entities filing the suit.

Last August, a firm whose ultimate owners reside in the Cayman Islands lodged a claim against the UK government. The previous week a arbitration panel in the United States was set up to consider the case.

The company is litigating against the UK for the money it could have earned if the mine had received permission to go ahead. Citizens have no idea how much this sum represents. Who is acting on its behalf in opposition to the UK administration? An elected representative, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the domestic court supports it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coalmine case was convened, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case so far, but it appears probable that he will utilise the arbitration process to fight the penalties the UK levied against him following the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, seeking sixteen billion dollars: half that government’s yearly income. Among the counsel representing him there? a prominent lawyer, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in leveraging immobilised state funds as security for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that such things were not possible. In 2014, a former prime minister, advocating for the largest and riskiest of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has never been a case in the past.” An expert on this issue labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “as corporations grasp the authority bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That prediction is now a reality. In the current period, energy and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – official measures to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP