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Can you perceive our democratic process operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills become law. Legislation is maintained by the courts. That's it. Well, that’s how it used to work. Not anymore.

The Rise of Shadow Courts

Nowadays, international firms, along with the oligarchs behind them, can sue elected administrations for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases are held in secret. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even companies based in this country. The door is open exclusively to corporations registered abroad.

Should an arbitration panel finds that a legislative action could harm the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These sums constitute not real financial harm but funds the arbitrators conclude the company might otherwise have made. The state may have to abandon its policy. It will be hesitant to introducing similar legislation in that area, for fear of being sued.

A Process Running Rampant

Record numbers of disputes are being brought, as corporations observe each other, and private equity bankroll lawsuits for a share of a share of the awards. The outcome? Sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the decisions made by parliaments is that this stipulation has been incorporated – without public consent, and often in a climate of total confidentiality – inside international trade agreements.

A Specific Instance: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer ruled that proposals to dig the first new deep coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have no impact on national carbon targets. The new government subsequently revoked the permission the previous administration had issued. Now, this victory faces being overturned by an offshore tribunal answering to no one but the entities bringing the case.

Last August, a corporate entity whose beneficial owners are located in the tax haven lodged a claim challenging the UK government. Last week a dispute settlement body in the US capital was set up to hear it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to commence operations. We have no clear indication how much this could amount to. Which individual is serving as its counsel in opposition to the British government? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The administration makes a decision, the national judiciary validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Case

Simultaneously that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case to date, but it seems likely that he’ll use the tribunal to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against a small nation on these grounds, seeking $16bn: equivalent to half of government’s yearly budget. Part of the legal team representing him there? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s procrastination in using frozen oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations may be obstructing the money Ukraine desperately needs.

Misleading Claims and Growing Risks

We were assured that such things were not possible. Years ago, a former prime minister, championing the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” A consultant on this topic described critics of “alarmism … in reality, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations had to worry about such legal actions. Warnings that “when companies grasp the influence they now possess, they will turn their attention from the weak nations to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. Recently, oil and gas and mining firms have filed a record number of suits against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Companies have so far won $114bn through ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP