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What is your understand our democratic process operates? Perhaps something like this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Advent of Shadow Tribunals

Today, foreign corporations, along with the oligarchs who own them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. The cases are held in secret. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted solely for businesses operating from foreign soil.

When a secret court finds that a law or policy might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These awards are based not on actual losses but money the arbitrators conclude the company might otherwise have made. The government may have to rescind the measure. It becomes hesitant to enacting future policies in that area, for fear of facing litigation.

A System Growing Exponentially

Unprecedented levels of legal actions are being brought, as companies take cues from each other, and investment funds fund legal actions in exchange for a share of the settlements. The outcome? National sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices made by parliaments is that this stipulation has been written – without democratic mandate, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

Last year, activists secured a significant win at the High Court. The justice found that proposals to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on national carbon targets. The new government then withdrew the consent the Tories had approved. Today, this legal outcome could be compromised by an foreign court reporting to exclusively the entities bringing the case.

In August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim against the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

This firm is suing the UK for the revenue it could have earned if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. Who is acting on its behalf against the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The state makes a decision, the high court supports it, then a international entity disputes it through an secretive offshore tribunal, and a elected official acts on its behalf.

A Sanctions Case

Concurrently that the tribunal on the coalmine case was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he’ll use the tribunal to contest the restrictions the UK levied against him following the Russian aggression. He has previously started suing a small nation for this reason, demanding a colossal sum: half that nation's yearly budget. Included in the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts argue that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over sovereign states could be blocking the money Ukraine urgently requires.

False Assurances and Mounting Risks

The public was told that these events wouldn’t happen. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade agreement upon trade deal and there has not been a issue in the past.” A consultant on this matter described critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with widespread derision.

That threat has now materialised. In the current period, energy and extraction companies have lodged a historic level of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Corporations have to date won $114bn through ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP