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How do you perceive our democratic process operates? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Statutes are enforced by the courts. End of story. However, that was how it used to work. No longer.

The Emergence of Shadow Tribunals

Nowadays, foreign corporations, or the wealthy individuals that control them, have the power to sue governments for the regulations they pass, at private courts composed of corporate lawyers. Such disputes are held in secret. Unlike our courts, these bodies allow no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. They are open only to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, running into billions.

These awards constitute not actual losses but compensation the panel members decide the company could potentially have made. The government might be compelled to rescind the measure. It becomes discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being brought, as companies observe each other, and investment funds finance suits in exchange for a portion of the takings. The consequence? Sovereignty and democracy are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the rulings taken by parliaments is that this stipulation has been written – without democratic mandate, and frequently under conditions of extreme secrecy – within trade treaties.

A Concrete Case: The Cumbrian Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The judge ruled that proposals to open the first new deep coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have no impact on national carbon targets. The Labour government then withdrew the consent the former government had issued. Currently, this success is under threat by an offshore tribunal accountable to only the corporations petitioning it.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was set up to adjudicate on it.

The company is suing the UK for the profits it might have made if the mine had been allowed to go ahead. Citizens have no idea how much this sum represents. Who is serving as its counsel challenging the state? An elected representative, and former attorney-general in the previous government, the noted patriot the MP. The state makes a decision, the high court supports it, then a foreign company contests it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case to date, but it seems likely that he will utilise the tribunal to fight the restrictions the UK enacted against him after the Russian aggression. He has started suing Luxembourg with similar intent, claiming $16bn: an amount representing half nation's annual revenue. Among the counsel on his side? Cherie Blair, married to the ex-UK leader.

Legal experts argue that the EU’s procrastination in using frozen state funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine critically depends on.

Misleading Claims and Mounting Threats

Politicians promised that these events were not possible. Previously, a government leader, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” An expert on this matter accused activists of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear such legal actions. Predictions that “as corporations grasp the influence they now possess, they will turn their attention from the weak nations to the wealthy nations” were met with widespread derision.

That threat has now materialised. This year, oil and gas and resource corporations have lodged a historic level of cases against nations rich and poor, opposing – as in the case of the UK mine – official measures to halt climate breakdown. Corporations have to date won vast sums via ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP