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What is your reckon our democratic process operates? It could be similar to this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills become law. The law is upheld by the courts. End of story. Yet, that was how it once functioned. No longer.

The Emergence of Shadow Courts

Nowadays, foreign corporations, along with the oligarchs that control them, are able to litigate against nation states for the policies they pass, at private courts composed of corporate lawyers. The cases are held in secret. Unlike our courts, these bodies grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even businesses operating from this country. They are open only to entities operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions, potentially billions.

These awards are based not on actual losses but funds the panel members determine the company could potentially have made. The administration may have to rescind the measure. It becomes deterred from passing future laws in that area, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of disputes are being filed, as firms take cues from each other, and hedge funds fund legal actions in return for a cut of the awards. The result? National sovereignty and democracy are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices enacted by elected bodies is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Concrete Instance: The UK Coal Mine

Twelve months ago, activists won a great victory at the High Court. The presiding officer ruled that plans to dig the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The Labour government then withdrew the licence the former government had issued. Currently, this legal outcome could be compromised by an offshore tribunal accountable to no one but the companies petitioning it.

In August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings versus the UK government. The previous week a arbitration panel in the US capital was set up to hear it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the high court validates it, then a international entity challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

Concurrently that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case so far, but it seems likely that he will utilise the arbitration process to challenge the penalties the UK imposed on him after the Russian aggression. He has already initiated proceedings against Luxembourg for this reason, demanding sixteen billion dollars: an amount representing half state's annual revenue. Part of the legal team acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that such things could not occur. In 2014, a government leader, advocating for the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An expert on this matter labelled activists of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms grasp the authority they’ve been granted, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That warning is now a reality. Recently, fossil fuel and resource corporations have filed a unprecedented number of claims against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP