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Can you reckon our democratic process works? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Emergence of Shadow Tribunals

Today, overseas companies, and the oligarchs who own them, can sue elected administrations for the laws they pass, at private courts made up of commercial attorneys. These proceedings are held away from public scrutiny. Differing from national judiciaries, these tribunals grant no opportunity to appeal or judicial review. The general public cannot take a case to them, just as our government, or even companies based in this country. They are open only to corporations based overseas.

When a secret court determines that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

This compensation constitute not tangible damages but funds the panel members determine the company would perhaps have made. The administration could be forced to abandon its policy. It is discouraged from introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being filed, as companies observe each other, and investment funds finance suits in return for a share of the settlements. The result? Sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the rulings made by elected bodies is that this stipulation has been written – without public consent, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Real-World Instance: The UK Coal Mine

A year ago, activists secured a significant win at the high court. The judge determined that proposals to dig the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the consent the Tories had approved. Today, this success faces being overturned by an secret arbitration panel reporting to exclusively the companies bringing the case.

Last August, a firm whose beneficial owners are located in the Cayman Islands filed a lawsuit challenging the UK government. Recently a arbitration panel in the United States was set up to hear it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to proceed. The public has no idea how much this could amount to. What legal team is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a international entity contests it through an undemocratic private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case at present, but it is highly possible that he’ll use the arbitration process to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has started suing another European state for this reason, claiming a colossal sum: half that state's annual revenue. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s procrastination in leveraging immobilised state funds as security for its aid for 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 democratic administrations may be obstructing the finance Ukraine urgently requires.

Empty Promises and Growing Risks

We were assured that these events could not occur. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An expert on this topic labelled critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “as corporations begin to understand the power they now possess, they will turn their attention from the weak nations to the developed economies” were greeted by scepticism.

That warning has now materialised. This year, oil and gas and mining firms have lodged a historic level of cases against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have thus far won $114bn by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP