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Can you perceive our democratic process functions? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills pass into law. The law are enforced by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Emergence of Shadow Arbitration Panels

Nowadays, international firms, or the billionaires behind them, are able to litigate against elected administrations for the regulations they pass, at private courts composed of business advocates. These proceedings are held in secret. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open solely for corporations registered abroad.

When a secret court determines that a law or policy may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

These awards are based not on tangible damages but funds the tribunal officials conclude the company would perhaps have made. The government might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being filed, as companies take cues from each other, and private equity fund legal actions in exchange for a portion of the takings. The result? Sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the rulings enacted by parliaments is that this clause has been incorporated – without public consent, and frequently under a climate of profound opacity – into international trade agreements.

A Real-World Example: The UK Coalmine

Last year, activists secured a significant win at the senior court. The justice ruled that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have no consequence on our carbon budgets. The new government later cancelled the consent the Tories had approved. Now, this success faces being overturned by an foreign court reporting to only the corporations bringing the case.

During August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings against the UK government. Recently a dispute settlement body in the US capital was established to adjudicate on it.

This firm is litigating against the UK for the money it would have generated if the mine had received permission to commence operations. We have no idea how much this sum represents. Which individual is representing it against the state? A member of parliament, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The state makes a decision, the domestic court validates it, then a foreign company contests it through an secretive private court, and a member of our parliament represents its behalf.

The Russian Case

Concurrently that the tribunal 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 wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case to date, but it seems likely that he may employ the tribunal to challenge the sanctions the UK enacted against him after the war in Ukraine. He has started suing another European state for this reason, demanding a colossal sum: an amount representing half nation's yearly income. Among the legal team representing him there? Cherie Blair, spouse of the ex-UK leader.

Trade specialists argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over sovereign states may be obstructing the finance Ukraine desperately needs.

False Assurances and Growing Risks

Politicians promised that these events wouldn’t happen. Years ago, a government leader, championing the largest and riskiest of all these agreements, declared: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this topic described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were greeted by scepticism.

That threat is now a reality. This year, energy and extraction companies have lodged a record number of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – government attempts to halt global warming. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP