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How do you understand our democratic process operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. That's it. However, that used to be how it once functioned. Those days are over.

The Rise of Shadow Tribunals

Nowadays, foreign corporations, along with the billionaires who own them, are able to litigate against governments for the regulations they pass, at private courts made up of business advocates. Such disputes are held in secret. In contrast to domestic courts, these tribunals grant no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including businesses based in this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, even billions.

These sums represent not tangible damages but funds the tribunal officials determine the company might otherwise have made. The administration may have to rescind the measure. It will be deterred from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of disputes are being filed, as firms observe each other, and private equity bankroll lawsuits in exchange for a portion of the settlements. The consequence? National sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the rulings taken by elected bodies is that this clause has been written – without democratic mandate, and often in a climate of extreme secrecy – into bilateral investment treaties.

A Concrete Instance: The UK Coalmine

Last year, a conservation group secured a significant win at the High Court. The presiding officer found that plans to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have had no consequence on our carbon budgets. The new government subsequently revoked the licence the previous administration had issued. Now, this success faces being overturned by an secret arbitration panel answering to only the companies filing the suit.

In August, a company whose ultimate owners are based in the offshore financial centre lodged a claim against the UK government. The previous week a arbitration panel in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has little idea how much this sum represents. Which individual is serving as its counsel in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government makes a decision, the domestic court supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it seems likely that he will utilise the arbitration process to fight the restrictions the UK imposed on him after the war in Ukraine. He has initiated proceedings against another European state for this reason, seeking sixteen billion dollars: equivalent to half of nation's yearly budget. Part of the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Mounting Costs

The public was told that such things were not possible. Years ago, a former prime minister, advocating for the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal upon trade deal and there has never been a problem in the past.” An adviser on this topic accused activists of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “as corporations begin to understand the power they’ve been granted, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That prediction has come to pass. In the current period, fossil fuel and mining firms have initiated a record number of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP