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How do you understand our democratic process functions? It could be similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. The law is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Rise of Shadow Tribunals

Today, international firms, along with the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at private courts composed of corporate lawyers. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels grant no avenue for appeal or judicial review. You or I are unable to file a case to them, nor can our government, including businesses operating from this country. They are open solely for businesses registered abroad.

If a tribunal finds that a legislative action may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation constitute not real financial harm but money the tribunal officials determine the company would perhaps have made. The government could be forced to drop the legislation. It is hesitant to introducing similar legislation along the same lines, worried about being sued.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as firms learn from each other, and hedge funds bankroll lawsuits in return for a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings enacted by legislatures is that this clause has been inserted – without public consent, and frequently under a climate of total confidentiality – inside trade treaties.

A Specific Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The judge found that plans to excavate the first new deep coal mine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government then withdrew the permission the Tories had approved. Today, this victory faces being overturned by an offshore tribunal answering to exclusively the companies petitioning it.

Last August, a firm whose final controllers reside in the tax haven filed a lawsuit against the UK government. Recently a dispute settlement body in Washington DC was established to hear it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had received permission to go ahead. The public has no idea how much this might be. Who is representing it against the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a foreign company contests it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coalmine case was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case so far, but it seems likely that he will utilise the arbitration process to contest the restrictions the UK imposed on him after the war in Ukraine. He has initiated proceedings against another European state with similar intent, claiming sixteen billion dollars: an amount representing half state's yearly income. Part of the lawyers representing him there? a prominent lawyer, wife of the former British prime minister.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over elected governments might be preventing the finance Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that these events wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” A consultant on this issue labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “when companies begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with scepticism.

That prediction has now materialised. In the current period, energy and extraction companies have filed a record number of suits against nations rich and poor, contesting – like the example of the Whitehaven project – government attempts to halt global warming. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP