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Can you perceive our democratic process works? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, or the billionaires that control them, can sue governments for the laws they pass, at private courts composed of business advocates. The cases are held away from public scrutiny. Differing from national judiciaries, these bodies grant no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even enterprises based in this country. Access is granted only to entities registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards constitute not tangible damages but funds the tribunal officials decide the company would perhaps have made. The administration might be compelled to abandon its policy. It will be discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as firms observe each other, and investment funds fund legal actions in exchange for a share of the takings. The result? National sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the rulings taken by elected bodies is that this provision has been incorporated – without public consent, and often in conditions of extreme secrecy – within trade treaties.

A Specific Case: The UK Coal Mine

A year ago, activists secured a significant win at the high court. The justice determined that proposals to open the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have zero effect on climate commitments. The Labour government later cancelled the licence the former government had issued. Now, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the corporations filing the suit.

Last August, a corporate entity whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. Recently a dispute settlement body in Washington DC was convened to hear it.

The company is suing the UK for the money it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this could amount to. Who is representing it in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The government makes a decision, the domestic court validates it, then a overseas corporation contests it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Challenge

On the same day that the court on the coalmine case was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he’ll use the arbitration process to contest the restrictions the UK levied against him following the invasion of Ukraine. He has already filed a claim against another European state with similar intent, seeking $16bn: half that state's yearly income. Part of the lawyers representing him there? Cherie Blair, spouse of the previous PM.

International law scholars argue that the EU’s delay in utilising seized state funds as security for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Costs

The public was told that these events wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” A consultant on this issue labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations needed to fear such legal actions. Warnings that “when companies start to realise the influence they now possess, they will shift their focus from the weak nations to the wealthy nations” were dismissed with widespread derision.

That warning is now a reality. This year, fossil fuel and extraction companies have initiated a record number of cases against nations both wealthy and developing, challenging – similar to the UK mine – official measures to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP