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Can you reckon our democratic process operates? Perhaps similar to this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. The law is upheld by the courts. End of story. Yet, that used to be how it once functioned. Those days are over.

The Rise of Shadow Tribunals

Nowadays, foreign corporations, or the oligarchs behind them, can sue elected administrations for the regulations they pass, at private courts made up of business advocates. These proceedings are conducted behind closed doors. Differing from national judiciaries, these bodies grant no avenue for appeal or legal review. The general public cannot take a case to them, just as our government, or even businesses based in this country. Access is granted solely for businesses based overseas.

If a tribunal finds that a law or policy may compromise the corporation’s expected profits, it can award damages of hundreds of millions, potentially billions.

This compensation are based not on tangible damages but compensation the panel members determine the company could potentially have made. The state may have to abandon its policy. It is deterred from passing future laws in that area, due to the risk of being sued.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The result? Democratic sovereignty and democracy are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions taken by parliaments is that this stipulation has been incorporated – absent public approval, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The justice ruled that plans to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine could have zero effect on climate commitments. The Labour government later cancelled the consent the previous administration had granted. Currently, this success is under threat by an secret arbitration panel answering to only the entities petitioning it.

Last August, a firm whose ultimate owners are located in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in the United States was set up to hear it.

This firm is suing the UK for the money it could have earned if the mine had received permission to proceed. We have little idea how much this sum represents. Who is representing it against the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration passes a law, the high court supports it, then a international entity contests it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case to date, but it appears probable that he will utilise the tribunal to contest the sanctions the UK enacted against him following the Russian aggression. He has filed a claim against a small nation on these grounds, seeking sixteen billion dollars: half that state's annual revenue. Among the lawyers on his side? a prominent lawyer, wife of the previous PM.

Trade specialists argue that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that such things were not possible. Years ago, a government leader, promoting the largest and riskiest of all such treaties, told us: “We’ve signed investment treaty upon trade deal and there has never been a case in the past.” A consultant on this matter described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “once firms start to realise the power they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were met with widespread derision.

That prediction has now materialised. This year, energy and resource corporations have filed a record number of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – official measures to stop global warming. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP