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Can you perceive our democratic process functions? It could be something like this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. The law is upheld by the courts. That's it. Yet, that’s how it used to work. Those days are over.

The Rise of Shadow Tribunals

Today, foreign corporations, along with the wealthy individuals that control them, are able to litigate against governments for the regulations they pass, at private courts composed of commercial attorneys. Such disputes take place behind closed doors. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. You or I are unable to file a case to them, just as our government, including businesses operating from this country. They are open only to corporations operating from foreign soil.

When a secret court finds that a law or policy could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

This compensation represent not actual losses but money the arbitrators decide the company might otherwise have made. The administration may have to rescind the measure. It becomes discouraged from enacting future policies along the same lines, due to the risk of being sued.

A Process Growing Exponentially

Record numbers of cases are being initiated, as companies observe each other, and private equity bankroll lawsuits in exchange for a share of the settlements. The outcome? Democratic sovereignty and democratic governance are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the rulings enacted by legislatures is that this stipulation has been written – absent public approval, and often in an atmosphere of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Last year, activists won a great victory at the high court. The justice determined that plans to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have had zero effect on national carbon targets. The new government subsequently revoked the consent the previous administration had approved. Currently, this success faces being overturned by an secret arbitration panel answering to exclusively the companies petitioning it.

During August, a company whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. Recently a arbitration panel in Washington DC was convened to adjudicate on 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 could amount to. Who is serving as its counsel in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, that great patriot the MP. The administration makes a decision, the domestic court validates it, then a international entity challenges it through an secretive arbitration panel, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the court on the mining lawsuit was established, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against another European state on these grounds, seeking sixteen billion dollars: an amount representing half nation's annual revenue. Included in the legal team representing him there? Cherie Blair, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised Russian assets as security for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over democratic administrations may be obstructing the money Ukraine urgently requires.

Empty Promises and Growing Threats

We were assured that these events could not occur. In 2014, a senior politician, promoting the largest and riskiest of all these agreements, declared: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this issue accused campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states had to worry about such legal actions. Predictions that “as corporations start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning has come to pass. This year, energy and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, contesting – similar to the Whitehaven project – state efforts to prevent climate breakdown. Companies have thus far won $114bn via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP