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What is your perceive our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. End of story. Yet, that’s how it used to work. No longer.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, and the wealthy individuals that control them, are able to litigate against nation states for the regulations they pass, at private courts staffed by business advocates. Such disputes are held behind closed doors. Unlike our courts, these panels grant no opportunity to appeal or legal review. You or I are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. They are open exclusively to entities registered abroad.

If a tribunal rules that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of vast sums, even billions.

This compensation represent not real financial harm but funds the arbitrators decide the company might otherwise have made. The state may have to rescind the measure. It becomes hesitant to introducing similar legislation in that area, for fear of being sued.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits in return for a cut of the awards. The result? National sovereignty and democracy are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the rulings enacted by parliaments is that this provision has been written – without democratic mandate, and typically amid a climate of extreme secrecy – inside international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice determined that schemes to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have no impact on our carbon budgets. The new government subsequently revoked the licence the previous administration had granted. Now, this legal outcome could be compromised by an secret arbitration panel accountable to only the entities petitioning it.

During August, a company whose ultimate owners are based in the Cayman Islands initiated proceedings against the UK government. Recently a arbitration panel in the United States was established to adjudicate on it.

This firm is litigating against the UK for the profits it would have generated if the mine had been permitted to proceed. The public has no idea how much this might be. Who is representing it against the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The administration enacts a policy, the national judiciary supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case to date, but it seems likely that he’ll use the ISDS mechanism to fight the restrictions the UK imposed on him following the war in Ukraine. He has previously started suing Luxembourg on these grounds, claiming a colossal sum: half that government’s yearly budget. Part of the counsel acting for him in that case? Cherie Blair, married to the previous PM.

International law scholars believe that the EU’s delay in utilising seized oligarchs' funds as security for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Escalating Threats

Politicians promised that such things could not occur. Years ago, a senior politician, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An expert on this issue accused critics of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about these lawsuits. Predictions that “once firms start to realise the power bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has come to pass. Recently, oil and gas and extraction companies have filed a historic level of claims against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – government attempts to prevent global warming. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP