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What is your reckon our democratic process functions? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. End of story. However, that’s how it used to work. No longer.

The Rise of Shadow Tribunals

Nowadays, overseas companies, or the wealthy individuals who own them, have the power to sue nation states for the policies they pass, at private courts staffed by commercial attorneys. The cases are held in secret. Unlike our courts, these tribunals allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies operating from this country. Access is granted solely for corporations registered abroad.

When a secret court rules that a law or policy could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These sums represent not tangible damages but funds the arbitrators decide the company could potentially have made. The government might be compelled to rescind the measure. It will be hesitant to enacting future policies along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being brought, as companies observe each other, and investment funds bankroll lawsuits for a share of a portion of the awards. The outcome? Democratic sovereignty and democracy are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the decisions enacted by parliaments is that this stipulation has been inserted – absent public approval, and typically amid a climate of extreme secrecy – within trade treaties.

A Specific Instance: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on climate commitments. The new government later cancelled the permission the former government had approved. Now, this victory faces being overturned by an foreign court accountable to exclusively the companies bringing the case.

During August, a corporate entity whose beneficial owners are located in the tax haven lodged a claim versus the UK government. Last week a tribunal in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to proceed. We have no idea how much this could amount to. What legal team is serving as its counsel against the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The administration makes a decision, the high court validates it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament represents its behalf.

An Oligarch's Case

Concurrently that the panel on the mining lawsuit was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case to date, but it appears probable that he will utilise the tribunal to contest the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has already initiated proceedings against another European state on these grounds, seeking a colossal sum: equivalent to half of state's annual revenue. Part of the legal team acting for him in that case? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its loan to Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over democratic administrations may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

The public was told that these events wouldn’t happen. Years ago, a former prime minister, advocating for the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” An adviser on this matter labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about these lawsuits. Predictions that “once firms grasp the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were dismissed with widespread derision.

That prediction has come to pass. In the current period, energy and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to prevent environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP