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How do you understand our democratic process works? It could be something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. Yet, that’s how it once functioned. No longer.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the billionaires that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings take place away from public scrutiny. Unlike our courts, these panels allow no right of appeal or judicial review. You or I are unable to file a case to them, and neither can our government, including enterprises based in this country. Access is granted only to entities based overseas.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, even billions.

This compensation constitute not tangible damages but funds the tribunal officials decide the company would perhaps have made. The administration might be compelled to drop the legislation. It will be deterred from enacting future policies of a similar nature, due to the risk of being sued.

A System Spiralling Out of Control

Historically high figures of legal actions are being brought, as corporations take cues from each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The consequence? Democratic sovereignty and popular rule are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the decisions made by parliaments is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Real-World Instance: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The justice ruled that plans to excavate the first deep coalmine in the UK for three decades, in northwest England, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no consequence on climate commitments. The incoming administration later cancelled the permission the Tories had granted. Today, this success faces being overturned by an foreign court reporting to only the corporations filing the suit.

Last August, a corporate entity whose beneficial owners are located in the tax haven filed a lawsuit against the UK government. Recently a arbitration panel in the United States was convened to consider the case.

The company is litigating against the UK for the profits it could have earned if the mine had received permission to proceed. Citizens have no idea how much this might be. What legal team is representing it challenging the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Challenge

On the same day that the court on the coalmine case 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. We know little of the case at present, but it appears probable that he may employ the tribunal to fight the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has already initiated proceedings against a small nation with similar intent, seeking a colossal sum: half that state's yearly budget. Part of the legal team acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

International law scholars believe that the EU’s delay in utilising seized state funds as guarantee for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over sovereign states may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Costs

Politicians promised that such things wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, stated: “We’ve signed investment treaty upon trade deal and there has never been a case in the past.” An expert on this matter described activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were dismissed with general mockery.

That prediction is now a reality. In the current period, fossil fuel and extraction companies have filed a historic level of cases against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – government attempts to stop global warming. Firms have so far won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP