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Can you reckon our democratic process functions? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Legislation is upheld by the courts. End of story. However, that was how it operated in the past. Those days are over.

The Advent of Shadow Courts

In the modern era, foreign corporations, along with the oligarchs who own them, can sue elected administrations for the regulations they pass, at private courts composed of corporate lawyers. Such disputes take place behind closed doors. In contrast to domestic courts, these bodies allow no avenue for appeal or legal review. You or I are unable to file a case to them, just as our government, including businesses headquartered in this country. The door is open solely for businesses registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it may order compensation of vast sums, even billions.

This compensation constitute not actual losses but funds the panel members determine the company would perhaps have made. The administration might be compelled to abandon its policy. It becomes hesitant to passing future laws along the same lines, worried about incurring a lawsuit.

A Process Running Rampant

Record numbers of disputes are being initiated, as companies take cues from each other, and hedge funds fund legal actions for a share of a portion of the takings. The consequence? National sovereignty and democracy are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the choices taken by legislatures is that this provision has been incorporated – without public consent, and often in an atmosphere of extreme secrecy – within trade treaties.

A Specific Case: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to open the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had no impact on climate commitments. The incoming administration subsequently revoked the licence the Tories had issued. Currently, this legal outcome faces being overturned by an offshore tribunal reporting to only the corporations petitioning it.

During August, a corporate entity whose beneficial owners are based in the tax haven initiated proceedings versus the UK government. Recently a tribunal in the United States was set up to consider the case.

The company is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. Citizens have no idea how much this could amount to. Who is representing it against the UK administration? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coal mine dispute was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the sanctions the UK enacted against him after the invasion of Ukraine. He has previously started suing Luxembourg for this reason, demanding $16bn: equivalent to half of nation's yearly income. Part of the legal team acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists believe that the EU’s procrastination in utilising seized state funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that these events were not possible. Years ago, a government leader, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this matter accused campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about such legal actions. Warnings that “as corporations start to realise the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were dismissed with widespread derision.

That warning is now a reality. This year, energy and resource corporations have filed a historic level of claims against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP