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What is your reckon our democratic process works? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. End of story. Yet, that was how it once functioned. Those days are over.

The Emergence of Shadow Courts

Today, international firms, and the billionaires that control them, can sue nation states for the regulations they pass, at secret arbitration panels made up of business advocates. The cases are held behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even enterprises based in this country. The door is open exclusively to businesses based overseas.

When a secret court determines that a law or policy could harm the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These awards represent not tangible damages but compensation the tribunal officials decide the company might otherwise have made. The administration could be forced to drop the legislation. It is hesitant to enacting future policies of a similar nature, worried about facing litigation.

A System Running Rampant

Historically high figures of disputes are being initiated, as companies take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the takings. The result? National sovereignty and democratic governance are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices made by legislatures is that this clause has been inserted – without democratic mandate, and frequently under a climate of total confidentiality – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

A year ago, activists won a great victory at the High Court. The justice ruled that plans to excavate the first major coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The new government later cancelled the licence the Tories had granted. Currently, this success faces being overturned by an offshore tribunal reporting to no one but the entities petitioning it.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to go ahead. Citizens have no idea how much this sum represents. Who is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot the MP. The government passes a law, the national judiciary supports it, then a international entity challenges it through an unaccountable arbitration panel, and a elected official acts on its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case to date, but it appears probable that he may employ the tribunal to challenge the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has already started suing Luxembourg on these grounds, demanding a colossal sum: equivalent to half of government’s yearly budget. Among the lawyers representing him there? a prominent lawyer, married to the ex-UK leader.

International law scholars contend that the EU’s delay in leveraging immobilised Russian assets as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Threats

Politicians promised that such things were not possible. In 2014, a government leader, promoting the most significant and hazardous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this matter accused critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations begin to understand the influence they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were met with general mockery.

That threat is now a reality. Recently, fossil fuel and resource corporations have filed a historic level of cases against nations rich and poor, challenging – like the example of the UK mine – government attempts to stop climate breakdown. Companies have thus far won vast sums through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP