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Can you reckon our democratic process works? Perhaps something like this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. Yet, that was how it operated in the past. No longer.

The Advent of Shadow Courts

Today, international firms, and the billionaires behind them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, including enterprises based in this country. The door is open solely for corporations operating from foreign soil.

If a tribunal rules that a legislative action could harm the corporation’s anticipated profits, it can award compensation of hundreds of millions, potentially billions.

This compensation constitute not actual losses but compensation the arbitrators decide the company would perhaps have made. The administration might be compelled to drop the legislation. It becomes deterred from passing future laws along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being initiated, as corporations learn from each other, and investment funds bankroll lawsuits for a share of a cut of the takings. The outcome? National sovereignty and popular rule are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions enacted by elected bodies is that this clause has been inserted – without public consent, and typically amid an atmosphere of total confidentiality – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the senior court. The presiding officer found that plans to excavate the first major coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine would have had zero effect on our carbon budgets. The Labour government then withdrew the licence the Tories had approved. Now, this legal outcome faces being overturned by an offshore tribunal reporting to no one but the entities petitioning it.

Last August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in Washington DC was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had received permission to proceed. We have no idea how much this sum represents. Which individual is acting on its behalf against the UK administration? An elected representative, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coal mine dispute was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against a small nation on these grounds, demanding a colossal sum: equivalent to half of nation's annual revenue. Included in the legal team representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s delay in using frozen Russian assets as guarantee for its financial support package is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

False Assurances and Escalating Threats

We were assured that these events were not possible. Years ago, a government leader, advocating for the largest and riskiest of all investment pacts, stated: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this topic described campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were greeted by general mockery.

That threat is now a reality. This year, oil and gas and extraction companies have initiated a unprecedented number of suits against nations across the economic spectrum, challenging – like the example of the Whitehaven project – official measures to prevent climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP