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What is your understand our democratic process functions? It could be along the lines of this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Statutes is maintained by the courts. Simple as that. However, that used to be how it used to work. No longer.

The Advent of Shadow Courts

Nowadays, international firms, along with the billionaires that control them, can sue nation states for the policies they pass, at private courts made up of business advocates. These proceedings are held in secret. Unlike our courts, these tribunals grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted only to corporations based overseas.

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

These sums are based not on actual losses but money the tribunal officials determine the company could potentially have made. The administration may have to abandon its policy. It becomes deterred from enacting future policies of a similar nature, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies observe each other, and private equity finance suits for a share of a cut of the takings. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the decisions enacted by elected bodies is that this stipulation has been written – without democratic mandate, and typically amid a climate of profound opacity – inside bilateral investment treaties.

A Real-World Case: The UK Coalmine

A year ago, environmental campaigners won a great victory at the High Court. The judge found that proposals to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine could have no impact on climate commitments. The incoming administration subsequently revoked the permission the Tories had issued. Currently, this legal outcome could be compromised by an foreign court reporting to exclusively the entities petitioning it.

During August, a company whose final controllers are located in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was set up to hear it.

The company is litigating against the UK for the money it would have generated if the mine had received permission to go ahead. The public has no clear indication how much this sum represents. What legal team is representing it against the state? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a foreign company disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows little of the case at present, but it seems likely that he may employ the tribunal to challenge the restrictions the UK enacted against him following the Russian aggression. He has already initiated proceedings against a small nation on these grounds, demanding a colossal sum: equivalent to half of nation's yearly income. Among the legal team on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars argue that the EU’s hesitation in utilising seized state funds as security for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Risks

The public was told that these events wouldn’t happen. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed trade agreement upon trade deal and we have never seen a issue in the past.” An expert on this issue accused critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “once firms grasp the power they now possess, they will turn their attention from the poorer states to the developed economies” were met with scepticism.

That threat has come to pass. Recently, energy and mining firms have initiated a record number of suits against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP