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How do you reckon our democratic process functions? Perhaps similar to this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Advent of Shadow Courts

Today, foreign corporations, along with the oligarchs behind them, have the power to sue nation states for the regulations they pass, at private courts staffed by corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these bodies provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted only to entities based overseas.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards are based not on tangible damages but funds the panel members decide the company could potentially have made. The administration could be forced to drop the legislation. It will be hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of cases are being brought, as corporations take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the takings. The consequence? Sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the rulings made by elected bodies is that this provision has been written – absent public approval, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Specific Example: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The justice determined that proposals to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have no impact on national carbon targets. The Labour government later cancelled the licence the Tories had approved. Now, this legal outcome is under threat by an offshore tribunal reporting to no one but the corporations filing the suit.

During August, a company whose beneficial owners reside in the tax haven lodged a claim against the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. The public has no clear indication how much this might be. Who is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case at present, but it seems likely that he will utilise the arbitration process to fight the penalties the UK levied against him subsequent to the Russian aggression. He has already filed a claim against another European state for this reason, seeking a colossal sum: an amount representing half government’s yearly budget. Among the counsel representing him there? the wife of a former prime minister, married to the ex-UK leader.

Legal experts contend that the EU’s delay in using frozen state funds as collateral for its financial support package stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Growing Threats

We were assured that these scenarios could not occur. In 2014, a government leader, advocating for the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” An adviser on this matter described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations grasp the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were met with widespread derision.

That threat is now a reality. This year, energy and extraction companies have lodged a historic level of suits against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – government attempts to prevent global warming. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP