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How do you reckon our democratic process functions? Maybe something like this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. However, that used to be how it used to work. No longer.

The Advent of Shadow Courts

Nowadays, foreign corporations, and the oligarchs behind them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these tribunals grant no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. They are open only to businesses registered abroad.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions, even billions.

These awards are based not on tangible damages but money the panel members conclude the company could potentially have made. The state might be compelled to rescind the measure. It will be deterred from enacting future policies along the same lines, for fear of facing litigation.

A Process Growing Exponentially

Unprecedented levels of legal actions are being filed, as corporations observe each other, and private equity fund legal actions for a share of a portion of the settlements. The result? Sovereignty and popular rule are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the choices made by legislatures is that this clause has been inserted – absent public approval, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Concrete Example: The UK Coalmine

A year ago, a conservation group secured a significant win at the senior court. The justice found that proposals to open the first deep coalmine in the UK for three decades, in northwest England, had been wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine could have zero effect on national carbon targets. The new government then withdrew the permission the Tories had granted. Currently, this success faces being overturned by an offshore tribunal reporting to no one but the companies petitioning it.

In August, a firm whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Last week a dispute settlement body in Washington DC was established to consider the case.

The company is seeking compensation from the UK for the revenue it might have made if the mine had received permission to go ahead. We have little idea how much this might be. What legal team is representing it in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The government passes a law, the high court supports it, then a foreign company disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

On the same day that the court on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it seems likely that he may employ the tribunal to challenge the sanctions the UK imposed on him subsequent to the war in Ukraine. He has already initiated proceedings against a small nation for this reason, seeking $16bn: half that state's annual revenue. Included in the counsel acting for him in that case? a prominent lawyer, wife of the previous PM.

International law scholars argue that the EU’s procrastination in using frozen state funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Growing Risks

Politicians promised that these scenarios could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An expert on this matter labelled critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states had to worry about these lawsuits. Warnings that “when companies grasp the power they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That prediction has come to pass. This year, fossil fuel and mining firms have filed a historic level of claims against nations both wealthy and developing, opposing – as in the case of the UK mine – state efforts to stop global warming. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP