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What is your perceive our democratic process operates? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. However, that was how it used to work. Those days are over.

The Advent of Shadow Tribunals

Today, international firms, along with the billionaires that control them, can sue elected administrations for the policies they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are held behind closed doors. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses operating from this country. The door is open solely for entities based overseas.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

This compensation represent not real financial harm but funds the tribunal officials decide the company might otherwise have made. The government may have to drop the legislation. It becomes deterred from introducing similar legislation of a similar nature, for fear of being sued.

A System Running Rampant

Unprecedented levels of disputes are being initiated, as firms take cues from each other, and private equity fund legal actions in exchange for a cut of the takings. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the decisions enacted by elected bodies is that this provision has been written – without democratic mandate, and frequently under conditions of profound opacity – inside trade treaties.

A Real-World Case: The UK Coal Mine

A year ago, a conservation group won a great victory at the high court. The presiding officer determined that plans to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on national carbon targets. The Labour government subsequently revoked the permission the former government had issued. Now, this legal outcome faces being overturned by an offshore tribunal reporting to exclusively the companies petitioning it.

In August, a company whose final controllers reside in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was established to hear it.

The company is litigating against the UK for the money it would have generated if the mine had received permission to proceed. We have no idea how much this sum represents. What legal team is serving as its counsel in opposition to the British government? An elected representative, and ex-law officer in the outgoing administration, the noted patriot the MP. The state makes a decision, the high court supports it, then a overseas corporation contests it through an secretive private court, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it is highly possible that he will utilise the tribunal to challenge the sanctions the UK imposed on him following the war in Ukraine. He has previously started suing a small nation on these grounds, demanding a colossal sum: half that government’s annual revenue. Part of the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, championing the largest and riskiest of all such treaties, told us: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An expert on this matter labelled critics of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “once firms start to realise the authority they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with widespread derision.

That threat is now a reality. In the current period, fossil fuel and mining firms have filed a record number of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – government attempts to prevent climate breakdown. Firms have to date won $114bn by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP