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Can you understand our democratic process works? Perhaps similar to this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. End of story. Well, that’s how it once functioned. Those days are over.

The Advent of Shadow Courts

Today, foreign corporations, along with the billionaires behind them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are held behind closed doors. Differing from national judiciaries, these panels grant no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies operating from this country. Access is granted solely for businesses registered abroad.

Should an arbitration panel rules that a law or policy could harm the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These awards constitute not tangible damages but money the panel members decide the company would perhaps have made. The state might be compelled to abandon its policy. It is hesitant to passing future laws along the same lines, due to the risk of facing litigation.

A System Spiralling Out of Control

Historically high figures of legal actions are being initiated, as firms learn from each other, and private equity bankroll lawsuits in exchange for a portion of the settlements. The outcome? Sovereignty and popular rule are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the choices made by legislatures is that this provision has been incorporated – without public consent, and frequently under conditions of profound opacity – within trade treaties.

A Concrete Case: The UK Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The justice ruled that proposals to excavate the first deep coalmine in the UK for three decades, in Cumbria, were wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have no impact on our carbon budgets. The incoming administration then withdrew the permission the Tories had granted. Today, this victory is under threat by an secret arbitration panel reporting to no one but the entities filing the suit.

Last August, a corporate entity whose beneficial owners are located in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was convened to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had been allowed to go ahead. We have no idea how much this could amount to. Which individual is representing it against the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the domestic court validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the court on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case at present, but it is highly possible that he’ll use the tribunal to challenge the restrictions the UK imposed on him subsequent to the war in Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, seeking sixteen billion dollars: equivalent to half of state's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

Misleading Claims and Escalating Threats

The public was told that such things could not occur. Previously, a senior politician, promoting the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty upon trade deal and we have never seen a case in the past.” A consultant on this issue accused critics of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about such legal actions. Predictions that “once firms grasp the power bestowed upon them, they will turn their attention from the poorer states to the strong ones” were met with general mockery.

That threat is now a reality. In the current period, energy and resource corporations have filed a historic level of cases against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to prevent environmental catastrophe. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP