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How do you reckon our democratic process works? It could be something like this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. That's it. Well, that was how it used to work. No longer.

The Rise of Shadow Courts

In the modern era, foreign corporations, and the billionaires behind them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels staffed by business advocates. These proceedings are conducted behind closed doors. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. The general public cannot take a case to them, nor can our government, or even enterprises based in this country. The door is open only to businesses based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

This compensation are based not on actual losses but money the arbitrators decide the company could potentially have made. The state could be forced to abandon its policy. It is discouraged from passing future laws along the same lines, for fear of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of cases are being initiated, as firms observe each other, and investment funds bankroll lawsuits for a share of a cut of the takings. The result? Sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the rulings taken by parliaments is that this clause has been inserted – absent public approval, and often in conditions of profound opacity – into international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the high court. The judge ruled that plans to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine would have no impact on national carbon targets. The new government later cancelled the consent the former government had granted. Now, this legal outcome could be compromised by an offshore tribunal answering to only the corporations bringing the case.

In August, a corporate entity whose ultimate owners are based in the Cayman Islands initiated proceedings against the UK government. Last week a tribunal in Washington DC was established to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to commence operations. We have no idea how much this might be. Who is representing it against the state? A sitting MP, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a overseas corporation disputes it through an secretive private court, and a elected official works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the mining lawsuit was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he will utilise the tribunal to fight the penalties the UK imposed on him following the war in Ukraine. He has already started suing another European state on these grounds, claiming sixteen billion dollars: half that government’s yearly income. Among the legal team acting for him in that case? the wife of a former prime minister, married to the previous PM.

International law scholars believe that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Costs

The public was told that these scenarios were not possible. Previously, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An expert on this matter labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations needed to fear these lawsuits. Warnings that “as corporations begin to understand the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That warning has now materialised. This year, fossil fuel and mining firms have lodged a record number of suits against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have so far won $114bn via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP