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How do you perceive our democratic process works? Maybe similar to this. We elect MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. End of story. Well, that’s how it once functioned. Those days are over.

The Advent of Shadow Courts

Today, overseas companies, along with the wealthy individuals who own them, can sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases take place in secret. Differing from national judiciaries, these panels allow no opportunity to appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even companies operating from this country. They are open exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a government measure could harm the corporation’s expected profits, it may order compensation of hundreds of millions, potentially billions.

This compensation constitute not tangible damages but compensation the panel members determine the company could potentially have made. The administration may have to drop the legislation. It will be deterred from passing future laws of a similar nature, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of disputes are being filed, as firms take cues from each other, and investment funds bankroll lawsuits in exchange for a share of the settlements. The consequence? National sovereignty and popular rule are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the rulings enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under conditions of profound opacity – into trade treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the senior court. The judge determined that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, were illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on national carbon targets. The incoming administration then withdrew the consent the previous administration had approved. Now, this success faces being overturned by an offshore tribunal accountable to no one but the corporations petitioning it.

In August, a firm whose final controllers are based in the tax haven initiated proceedings versus the UK government. Last week a arbitration panel in the US capital was convened to hear it.

This firm is litigating against the UK for the money it would have generated if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. What legal team is acting on its behalf against the British government? An elected representative, and ex-law officer in the Conservative government, the noted patriot the MP. The state makes a decision, the national judiciary validates it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it seems likely that he will utilise the arbitration process to contest the restrictions the UK enacted against him after the invasion of Ukraine. He has started suing Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the legal team on his side? a prominent lawyer, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in using frozen oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Mounting Costs

Politicians promised that these scenarios could not occur. In 2014, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this topic labelled campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about ISDS claims. Predictions that “once firms grasp the influence they now possess, they will redirect their efforts from the weak nations to the developed economies” were greeted by general mockery.

That threat has come to pass. Recently, fossil fuel and resource corporations have filed a historic level of claims against nations rich and poor, contesting – similar to the UK mine – official measures to prevent environmental catastrophe. Corporations have so far won $114bn via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP