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What is your reckon our democratic process operates? Perhaps something like this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Yet, that’s how it used to work. Those days are over.

The Emergence of Shadow Tribunals

Nowadays, foreign corporations, or the oligarchs that control them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals grant no right of appeal or legal review. You or I are unable to file a case to them, just as our government, including enterprises headquartered in this country. They are open only to entities operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it may order compensation of vast sums, potentially billions.

These sums constitute not real financial harm but money the tribunal officials conclude the company could potentially have made. The administration could be forced to abandon its policy. It becomes deterred from introducing similar legislation in that area, for fear of being sued.

A Process Running Rampant

Historically high figures of cases are being brought, as companies observe each other, and investment funds finance suits for a share of a share of the settlements. The consequence? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings taken by elected bodies is that this provision has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – inside international trade agreements.

A Concrete Example: The Cumbrian Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The judge ruled that proposals to dig the first major coal mine in the UK for three decades, in northwest England, were unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have no consequence on national carbon targets. The Labour government then withdrew the licence the Tories had issued. Now, this legal outcome could be compromised by an secret arbitration panel accountable to exclusively the entities bringing the case.

Last August, a firm whose ultimate owners reside in the Cayman Islands lodged a claim challenging the UK government. The previous week a tribunal in the United States was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. Who is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The state passes a law, the high court supports it, then a foreign company disputes it through an undemocratic private court, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the panel on the mining lawsuit was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case at present, but it is highly possible that he may employ the tribunal to fight the penalties the UK levied against him subsequent to the war in Ukraine. He has already initiated proceedings against another European state for this reason, claiming a colossal sum: equivalent to half of state's annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised state funds as security for its financial support package is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine critically depends on.

False Assurances and Escalating Threats

Politicians promised that such things wouldn’t happen. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” A consultant on this matter labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about these lawsuits. Predictions that “when companies grasp the authority bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were greeted by general mockery.

That prediction has come to pass. This year, fossil fuel and mining firms have lodged a historic level of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – government attempts to prevent environmental catastrophe. Corporations have thus far won $114bn by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP