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Can you reckon our democratic process operates? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. End of story. Yet, that was how it once functioned. Those days are over.

The Advent of Shadow Tribunals

Today, overseas companies, along with the wealthy individuals that control them, can sue nation states for the regulations they pass, at private courts made up of corporate lawyers. Such disputes take place in secret. Unlike our courts, these tribunals provide no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even businesses operating from this country. The door is open only to entities registered abroad.

Should an arbitration panel determines that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These sums are based not on tangible damages but funds the arbitrators conclude the company could potentially have made. The administration might be compelled to drop the legislation. It is hesitant to enacting future policies of a similar nature, worried about being sued.

A System Growing Exponentially

Record numbers of legal actions are being initiated, as corporations learn from each other, and private equity finance suits in exchange for a portion of the takings. The result? Democratic sovereignty and democracy are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings taken by legislatures is that this provision has been written – absent public approval, and often in conditions of profound opacity – into bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The judge ruled that schemes to dig the first new deep coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration later cancelled the licence the previous administration had issued. Currently, this success is under threat by an foreign court answering to no one but the entities bringing the case.

In August, a company whose final controllers are located in the offshore financial centre initiated proceedings versus the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

The company is suing the UK for the money it would have generated if the mine had been allowed to proceed. The public has little idea how much this sum represents. Who is representing it challenging the British government? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case at present, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has previously initiated proceedings against a small nation on these grounds, seeking sixteen billion dollars: half that government’s yearly income. Included in the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s hesitation in using frozen oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over elected governments could be blocking the finance Ukraine urgently requires.

Empty Promises and Growing Threats

We were assured that such things could not occur. Previously, a government leader, advocating for the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this matter described critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “as corporations start to realise the authority bestowed upon them, they will shift their focus from the weak nations to the developed economies” were dismissed with general mockery.

That threat has now materialised. This year, oil and gas and resource corporations have lodged a unprecedented number of cases against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to halt climate breakdown. Firms have to date won $114bn through ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP