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How do you reckon our democratic process works? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills pass into law. The law is maintained by the courts. That's it. However, that was how it operated in the past. No longer.

The Emergence of Shadow Courts

In the modern era, international firms, along with the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals composed of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these tribunals provide no right of appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, including businesses based in this country. The door is open solely for businesses registered abroad.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but compensation the arbitrators determine the company could potentially have made. The administration may have to rescind the measure. It is hesitant to passing future laws of a similar nature, due to the risk of being sued.

A Mechanism Growing Exponentially

Historically high figures of disputes are being initiated, as companies observe each other, and hedge funds finance suits for a share of a cut of the takings. The result? National sovereignty and democratic governance are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the decisions enacted by legislatures is that this stipulation has been inserted – without public consent, and typically amid conditions of total confidentiality – within international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the senior court. The justice found that plans to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have zero effect on our carbon budgets. The incoming administration then withdrew the licence the former government had granted. Today, this success is under threat by an foreign court answering to no one but the companies filing the suit.

Last August, a company whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. Recently a dispute settlement body in the US capital was set up to consider the case.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to commence operations. We have little idea how much this might be. What legal team is serving as its counsel challenging the state? An elected representative, and former attorney-general in the Conservative government, that great patriot the MP. The administration makes a decision, the domestic court supports it, then a foreign company disputes it through an unaccountable offshore tribunal, and a elected official works for its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coal mine dispute was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it seems likely that he may employ the tribunal to contest the restrictions the UK enacted against him following the war in Ukraine. He has previously filed a claim against a small nation for this reason, demanding a colossal sum: an amount representing half state's yearly budget. Included in the legal team on his side? the wife of a former prime minister, spouse of the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Threats

Politicians promised that these scenarios could not occur. Previously, a government leader, championing the biggest and most dangerous of all such treaties, stated: “The UK has signed trade deal after trade deal and there has never been a case in the past.” A consultant on this matter described critics of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries should be concerned by these lawsuits. Warnings that “as corporations grasp the power they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by general mockery.

That warning has come to pass. Recently, fossil fuel and mining firms have initiated a record number of suits against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to stop global warming. Companies have so far won vast sums via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP