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How do you reckon our democratic process functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. That's it. Well, that’s how it operated in the past. Not anymore.

The Emergence of Shadow Courts

Today, foreign corporations, along with the billionaires who own them, can sue elected administrations for the laws they pass, at secret arbitration panels made up of commercial attorneys. The cases take place away from public scrutiny. In contrast to domestic courts, these tribunals allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, including businesses based in this country. They are open only to entities operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These sums constitute not tangible damages but compensation the arbitrators decide the company could potentially have made. The state may have to abandon its policy. It becomes discouraged from introducing similar legislation of a similar nature, worried about being sued.

A System Growing Exponentially

Historically high figures of disputes are being initiated, as firms observe each other, and investment funds bankroll lawsuits in return for a share of the takings. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions made by legislatures is that this clause has been incorporated – without democratic mandate, and typically amid a climate of extreme secrecy – inside international trade agreements.

A Concrete Case: The UK Coal Mine

Twelve months ago, activists won a great victory at the High Court. The judge found that proposals to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The Labour government later cancelled the permission the Tories had approved. Today, this legal outcome could be compromised by an offshore tribunal reporting to no one but the entities bringing the case.

In August, a corporate entity whose ultimate owners are based in the tax haven lodged a claim against the UK government. Last week a dispute settlement body in the US capital was established to hear it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. Citizens have no idea how much this might be. Who is acting on its behalf against the UK administration? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he may employ the tribunal to fight the restrictions the UK imposed on him after the Russian aggression. He has already started suing a small nation for this reason, demanding sixteen billion dollars: equivalent to half of state's yearly income. Among the legal team on his side? a prominent lawyer, wife of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

Empty Promises and Growing Risks

The public was told that these scenarios were not possible. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this topic described activists of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations needed to fear such legal actions. Warnings that “once firms start to realise the power they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with general mockery.

That warning is now a reality. Recently, fossil fuel and extraction companies have initiated a historic level of suits against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Firms have thus far won $114bn through ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP