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Can you understand our democratic process works? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that was how it once functioned. No longer.

The Advent of Shadow Tribunals

Today, overseas companies, along with the wealthy individuals who own them, can sue nation states for the policies they pass, at private courts composed of commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these tribunals allow no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even companies based in this country. Access is granted exclusively to businesses operating from foreign soil.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but funds the panel members determine the company would perhaps have made. The state could be forced to rescind the measure. It becomes hesitant to introducing similar legislation of a similar nature, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being initiated, as firms observe each other, and hedge funds fund legal actions for a share of a cut of the takings. The result? National sovereignty and democratic governance are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the decisions made by parliaments is that this provision has been written – without democratic mandate, and often in an atmosphere of extreme secrecy – inside international trade agreements.

A Real-World Example: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the licence the Tories had issued. Currently, this victory faces being overturned by an secret arbitration panel accountable to exclusively the companies petitioning it.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. Recently a dispute settlement body in the United States was convened to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this sum represents. Which individual is serving as its counsel in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official acts on its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case at present, but it is highly possible that he’ll use the tribunal to fight the penalties the UK enacted against him subsequent to the war in Ukraine. He has previously started suing another European state on these grounds, demanding sixteen billion dollars: equivalent to half of nation's yearly income. Included in the counsel on his side? a prominent lawyer, spouse of the previous PM.

International law scholars argue that the EU’s delay in utilising seized Russian assets as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over sovereign states may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Escalating Threats

We were assured that these scenarios were not possible. In 2014, a former prime minister, championing the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An adviser on this topic labelled critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by ISDS claims. Predictions that “as corporations grasp the authority bestowed upon them, 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, fossil fuel and extraction companies have initiated a record number of claims against nations across the economic spectrum, challenging – as in the case of the UK mine – official measures to prevent climate breakdown. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured the majority. That equates to the combined GDP