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How do you reckon our democratic process operates? It could be along the lines of this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that was how it operated in the past. Not anymore.

The Emergence of Shadow Courts

In the modern era, international firms, along with the wealthy individuals who own them, have the power to sue elected administrations for the laws they pass, at offshore tribunals made up of corporate lawyers. The cases take place in secret. Differing from national judiciaries, these panels provide no opportunity to appeal or legal review. The general public cannot take a case to them, nor can our government, or even companies operating from this country. The door is open solely for corporations operating from foreign soil.

When a secret court finds that a law or policy might diminish the corporation’s projected profits, it can award compensation of vast sums, running into billions.

This compensation represent not actual losses but money the panel members determine the company could potentially have made. The state could be forced to drop the legislation. It is hesitant to passing future laws in that area, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and hedge funds fund legal actions for a share of a share of the takings. The consequence? Sovereignty and democratic governance are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions enacted by parliaments is that this stipulation has been inserted – without public consent, and typically amid conditions of total confidentiality – inside trade treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, activists won a great victory at the high court. The justice determined that plans to excavate the first deep coalmine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The Labour government later cancelled the permission the Tories had approved. Today, this success could be compromised by an secret arbitration panel accountable to only the entities bringing the case.

During August, a firm whose final controllers are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in the United States was established to consider the case.

This firm is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to go ahead. We have little idea how much this might be. Which individual is acting on its behalf challenging the British government? An elected representative, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a foreign company challenges it through an unaccountable arbitration panel, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case so far, but it seems likely that he may employ the ISDS mechanism to fight the penalties the UK imposed on him following the invasion of Ukraine. He has filed a claim against a small nation on these grounds, demanding a colossal sum: an amount representing half nation's yearly budget. Among the lawyers on his side? Cherie Blair, spouse of the ex-UK leader.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as security for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

Misleading Claims and Escalating Risks

Politicians promised that these events were not possible. In 2014, a government leader, championing the biggest and most dangerous of all these agreements, stated: “Britain has agreed to investment treaty upon trade deal and there has never been a problem in the past.” An expert on this issue labelled campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by such legal actions. Warnings that “when companies begin to understand the influence they now possess, they will turn their attention from the weak nations to the strong ones” were greeted by widespread derision.

That prediction has come to pass. Recently, fossil fuel and mining firms have initiated a unprecedented number of suits against nations rich and poor, opposing – similar to the Whitehaven project – state efforts to prevent global warming. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP