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What is your perceive our democratic process works? Maybe similar to this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills pass into law. Legislation are enforced by the courts. That's it. However, that used to be how it once functioned. No longer.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the wealthy individuals that control them, have the power to sue governments for the policies they pass, at secret arbitration panels composed of commercial attorneys. Such disputes take place behind closed doors. In contrast to domestic courts, these tribunals allow no right of appeal or judicial review. The general public are unable to file a case to them, just as our government, including companies headquartered in this country. Access is granted solely for corporations registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions, potentially billions.

This compensation are based not on real financial harm but funds the tribunal officials determine the company might otherwise have made. The administration might be compelled to drop the legislation. It becomes deterred from passing future laws of a similar nature, for fear of being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as corporations take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? National sovereignty and democracy are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the rulings taken by elected bodies is that this clause has been written – without democratic mandate, and frequently under an atmosphere of profound opacity – into trade treaties.

A Specific Case: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on national carbon targets. The new government subsequently revoked the permission the Tories had issued. Currently, this success could be compromised by an offshore tribunal accountable to exclusively the corporations filing the suit.

In August, a company whose final controllers are located in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in the US capital was established to hear it.

The claimant is suing the UK for the money it might have made if the mine had received permission to go ahead. The public has little idea how much this sum represents. What legal team is acting on its behalf challenging the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration makes a decision, the high court upholds it, then a overseas corporation contests it through an secretive offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coalmine case was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case to date, but it is highly possible that he may employ the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the Russian aggression. He has previously filed a claim against Luxembourg on these grounds, claiming a colossal sum: half that government’s yearly budget. Part of the legal team acting for him in that case? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over elected governments might be preventing the finance Ukraine urgently requires.

False Assurances and Growing Costs

Politicians promised that these scenarios wouldn’t happen. In 2014, a government leader, promoting the largest and riskiest of all such treaties, told us: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this matter labelled campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations had to worry about ISDS claims. Predictions that “when companies start to realise the authority they now possess, they will shift their focus from the poorer states to the developed economies” were dismissed with widespread derision.

That prediction has now materialised. In the current period, oil and gas and mining firms have initiated a record number of cases against nations across the economic spectrum, contesting – similar to the UK mine – state efforts to halt climate breakdown. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP