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How do you understand our democratic process functions? Maybe similar to this. We elect MPs. They vote on bills. Should a majority is secured, the bills become law. The law is upheld by the courts. End of story. Yet, that was how it used to work. No longer.

The Emergence of Shadow Courts

Today, overseas companies, along with the wealthy individuals behind them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals grant no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. The door is open exclusively to corporations based overseas.

If a tribunal rules that a law or policy may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but funds the panel members determine the company would perhaps have made. The state could be forced to rescind the measure. It will be deterred from introducing similar legislation along the same lines, for fear of being sued.

A System Running Rampant

Historically high figures of legal actions are being brought, as corporations take cues from each other, and private equity bankroll lawsuits in return for a cut of the settlements. The result? Sovereignty and popular rule are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the decisions enacted by elected bodies is that this stipulation has been inserted – without public consent, and frequently under conditions of total confidentiality – inside international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The justice ruled that schemes to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have had no impact on climate commitments. The new government later cancelled the licence the former government had issued. Now, this success faces being overturned by an foreign court accountable to only the companies filing the suit.

Last August, a firm whose beneficial owners are located in the offshore financial centre lodged a claim against the UK government. The previous week a dispute settlement body in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. The public has little idea how much this sum represents. Who is serving as its counsel against the state? A member of parliament, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity disputes it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case at present, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK levied against him following the war in Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, demanding $16bn: half that state's yearly income. Included in the counsel on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s procrastination in using frozen Russian assets as security for its financial support package arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

Empty Promises and Mounting Risks

The public was told that these scenarios wouldn’t happen. In 2014, a senior politician, championing the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” A consultant on this issue described activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “once firms grasp the influence they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with widespread derision.

That warning is now a reality. Recently, energy and mining firms have lodged a record number of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – government attempts to halt climate breakdown. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP