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Can you perceive our democratic process works? It could be something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law are enforced by the courts. End of story. Yet, that used to be how it operated in the past. No longer.

The Emergence of Shadow Courts

In the modern era, foreign corporations, or the oligarchs that control them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of commercial attorneys. These proceedings take place away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises based in this country. Access is granted solely for entities operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions, running into billions.

These sums are based not on actual losses but compensation the tribunal officials determine the company would perhaps have made. The state may have to rescind the measure. It is deterred from enacting future policies of a similar nature, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as firms take cues from each other, and investment funds finance suits in exchange for a share of the settlements. The outcome? Sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the decisions enacted by parliaments is that this provision has been written – absent public approval, and often in a climate of total confidentiality – into trade treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the high court. The judge determined that schemes to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The incoming administration then withdrew the licence the previous administration had issued. Currently, this victory faces being overturned by an secret arbitration panel answering to no one but the corporations filing the suit.

Last August, a corporate entity whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was convened to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had been allowed to go ahead. Citizens have no idea how much this might be. What legal team is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the high court upholds it, then a foreign company contests it through an undemocratic private court, and a member of our parliament represents its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK enacted against him after the Russian aggression. He has already initiated proceedings against a small nation on these grounds, demanding $16bn: half that government’s yearly income. Part of the legal team acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Growing Risks

We were assured that these events wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this topic described activists of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about ISDS claims. Warnings that “as corporations begin to understand the authority bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with general mockery.

That warning has come to pass. In the current period, energy and mining firms have initiated a unprecedented number of suits against nations across the economic spectrum, challenging – like the example of the Whitehaven project – state efforts to prevent global warming. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP