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What is your perceive our democratic process functions? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. The law is upheld by the courts. That's it. However, that’s how it once functioned. No longer.

The Rise of Shadow Courts

Nowadays, overseas companies, along with the billionaires behind them, can sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these tribunals provide no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, including enterprises headquartered in this country. The door is open solely for businesses registered abroad.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it can award financial penalties of vast sums, potentially billions.

These sums represent not real financial harm but funds the tribunal officials decide the company would perhaps have made. The state might be compelled to drop the legislation. It becomes discouraged from enacting future policies along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as corporations learn from each other, and hedge funds finance suits in return for a portion of the takings. The result? Democratic sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the choices made by elected bodies is that this provision has been written – without democratic mandate, and typically amid a climate of extreme secrecy – within international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the High Court. The justice ruled that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the consent the former government had issued. Now, this success is under threat by an offshore tribunal accountable to only the corporations petitioning it.

During August, a corporate entity whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. The previous week a arbitration panel in the US capital was convened to consider the case.

This firm is suing the UK for the revenue it would have generated if the mine had been allowed to proceed. We have no clear indication how much this could amount to. Which individual is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a international entity contests it through an secretive offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case to date, but it seems likely that he may employ the ISDS mechanism to fight the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously started suing another European state for this reason, demanding sixteen billion dollars: an amount representing half government’s yearly income. Part of the legal team representing him there? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states could be blocking the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

We were assured that these events could not occur. Previously, a former prime minister, advocating for the most significant and hazardous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” A consultant on this issue accused campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries needed to fear ISDS claims. Predictions that “once firms begin to understand the influence bestowed upon them, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That prediction has come to pass. This year, energy and resource corporations have lodged a record number of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have to date won vast sums through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP