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Can you understand our democratic process operates? Perhaps similar to this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. The law are enforced by the courts. End of story. However, that was how it once functioned. No longer.

The Advent of Shadow Courts

Nowadays, foreign corporations, or the wealthy individuals that control them, are able to litigate against governments for the regulations they pass, at private courts composed of commercial attorneys. These proceedings are held behind closed doors. In contrast to domestic courts, these tribunals allow no avenue for appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, including businesses operating from this country. Access is granted only to corporations operating from foreign soil.

When a secret court rules that a government measure could harm the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but compensation the panel members decide the company might otherwise have made. The state may have to rescind the measure. It becomes deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as companies learn from each other, and hedge funds fund legal actions in return for a cut of the settlements. The result? Sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the decisions taken by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under conditions of profound opacity – into trade treaties.

A Specific Case: The UK Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The justice ruled that plans to dig the first major coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the licence the Tories had granted. Now, this legal outcome could be compromised by an foreign court reporting to only the companies petitioning it.

Last August, a company whose ultimate owners are based in the tax haven filed a lawsuit versus the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to commence operations. We have little idea how much this could amount to. Which individual is representing it in opposition to the British government? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a international entity contests it through an undemocratic private court, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coalmine case was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case to date, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK imposed on him after the war in Ukraine. He has filed a claim against another European state for this reason, demanding a colossal sum: equivalent to half of government’s annual revenue. Among the legal team on his side? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.

Misleading Claims and Growing Threats

We were assured that these events could not occur. In 2014, a former prime minister, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” An expert on this issue labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “once firms start to realise the influence bestowed upon them, they will turn their attention from the poorer states to the developed economies” were met with general mockery.

That threat has now materialised. Recently, fossil fuel and extraction companies have lodged a record number of claims against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained $84bn. That represents the combined GDP