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How do you understand our democratic process functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Well, that’s how it used to work. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, and the billionaires behind them, can sue elected administrations for the regulations they pass, at private courts made up of corporate lawyers. The cases are held behind closed doors. Unlike our courts, these panels provide no avenue for appeal or legal review. You or I are unable to file a case to them, just as our government, including companies based in this country. They are open exclusively to businesses operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s projected profits, it has the power to grant financial penalties of vast sums, running into billions.

This compensation represent not tangible damages but funds the panel members determine the company would perhaps have made. The administration may have to abandon its policy. It is discouraged from passing future laws in that area, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms learn from each other, and hedge funds fund legal actions in exchange for a portion of the settlements. The result? National sovereignty and popular rule are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the rulings made by legislatures is that this stipulation has been written – without public consent, and typically amid an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, activists secured a significant win at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration then withdrew the licence the Tories had issued. Currently, this success could be compromised by an foreign court accountable to only the corporations bringing the case.

During August, a firm whose beneficial owners are based in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in Washington DC was established to consider the case.

The company is suing the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has little idea how much this could amount to. Which individual is acting on its behalf in opposition to the state? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The government passes a law, the domestic court supports it, then a overseas corporation contests it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Case

On the same day that the tribunal on the mining lawsuit was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it appears probable that he may employ the ISDS mechanism to challenge the sanctions the UK imposed on him subsequent to the Russian aggression. He has started suing another European state for this reason, demanding sixteen billion dollars: half that nation's annual revenue. Part of the counsel acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Threats

Politicians promised that these scenarios could not occur. In 2014, a senior politician, championing the most significant and hazardous of all these agreements, declared: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” An expert on this topic described campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies start to realise the power they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were greeted by general mockery.

That warning has now materialised. This year, energy and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to prevent climate breakdown. Corporations have to date won vast sums via ISDS, of which oil majors have been awarded the majority. That represents the combined GDP