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How do you perceive our democratic process operates? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills become law. The law is upheld by the courts. Simple as that. Yet, that’s how it operated in the past. Those days are over.

The Emergence of Shadow Courts

Today, foreign corporations, along with the oligarchs who own them, can sue governments for the policies they pass, at secret arbitration panels composed of business advocates. The cases take place in secret. In contrast to domestic courts, these tribunals allow no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, including enterprises operating from this country. Access is granted solely for corporations based overseas.

If a tribunal finds that a legislative action could harm the corporation’s projected profits, it can award compensation of vast sums, potentially billions.

These awards are based not on real financial harm but money the arbitrators determine the company might otherwise have made. The government might be compelled to drop the legislation. It becomes hesitant to enacting future policies of a similar nature, worried about facing litigation.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations observe each other, and investment funds bankroll lawsuits in exchange for a portion of the awards. The result? Democratic sovereignty and democracy are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices taken by legislatures is that this provision has been incorporated – without public consent, and often in conditions of extreme secrecy – within international trade agreements.

A Real-World Instance: The Cumbrian Coal Mine

Last year, activists won a great victory at the High Court. The justice ruled that proposals to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been 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 Labour government then withdrew the permission the previous administration had issued. Now, this success could be compromised by an foreign court accountable to no one but the entities petitioning it.

During August, a firm whose ultimate owners are located in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a arbitration panel in the United States was established to adjudicate on it.

The claimant is suing the UK for the revenue it would have generated if the mine had been allowed to proceed. Citizens have no idea how much this might be. Which individual is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The state enacts a policy, the domestic court upholds it, then a international entity contests it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he may employ the tribunal to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has already started suing a small nation on these grounds, claiming a colossal sum: half that government’s yearly budget. Among the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s procrastination in utilising seized state funds as security for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over elected governments could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Threats

Politicians promised that these scenarios wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all investment pacts, declared: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” An expert on this issue labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “when companies grasp the authority bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were greeted by widespread derision.

That threat is now a reality. Recently, oil and gas and resource corporations have filed a record number of claims against nations rich and poor, contesting – like the example of the Whitehaven project – state efforts to prevent global warming. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP