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Can you understand our democratic process operates? Perhaps something like this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. The law are enforced by the courts. That's it. However, that used to be how it operated in the past. No longer.

The Emergence of Shadow Tribunals

Nowadays, foreign corporations, or the wealthy individuals behind them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these panels grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. They are open only to businesses operating from foreign soil.

When a secret court rules that a government measure might diminish the corporation’s anticipated profits, it can award financial penalties of vast sums, even billions.

This compensation constitute not tangible damages but funds the arbitrators conclude the company could potentially have made. The administration may have to rescind the measure. It is hesitant to passing future laws along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being initiated, as firms take cues from each other, and private equity fund legal actions in exchange for a cut of the awards. The result? Democratic sovereignty and democratic governance are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the decisions made by parliaments is that this provision has been inserted – absent public approval, and often in an atmosphere of total confidentiality – inside trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the licence the former government had issued. Now, this victory is under threat by an offshore tribunal reporting to exclusively the companies bringing the case.

Last August, a corporate entity whose beneficial owners are based in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

The company is suing the UK for the revenue it could have earned if the mine had been permitted to commence operations. The public has no clear indication how much this could amount to. What legal team is representing it against the state? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The state makes a decision, the national judiciary supports it, then a international entity disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

A Sanctions Case

Concurrently that the tribunal on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case at present, but it appears probable that he will utilise the arbitration process to contest the restrictions the UK levied against him after the Russian aggression. He has already filed a claim against Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of state's annual revenue. Included in the lawyers acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Legal experts contend that the EU’s delay in leveraging immobilised Russian assets as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

False Assurances and Mounting Costs

Politicians promised that such things could not occur. Years ago, a government leader, championing the largest and riskiest of all these agreements, stated: “We’ve signed trade agreement upon trade deal and there has not been a case in the past.” An adviser on this issue accused activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear ISDS claims. Predictions that “once firms grasp the influence bestowed upon them, they will turn their attention from the weak nations to the strong ones” were dismissed with scepticism.

That prediction has now materialised. In the current period, energy and extraction companies have initiated a unprecedented number of cases against nations both wealthy and developing, contesting – similar to the UK mine – state efforts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP