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Can you perceive our democratic process operates? It could be similar to this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Legislation is upheld by the courts. That's it. Well, that was how it once functioned. Those days are over.

The Rise of Shadow Courts

Nowadays, overseas companies, and the billionaires who own them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place behind closed doors. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even businesses based in this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy might diminish the corporation’s anticipated profits, it can award financial penalties of vast sums, potentially billions.

These sums are based not on actual losses but funds the tribunal officials conclude the company would perhaps have made. The administration may have to rescind the measure. It is deterred from introducing similar legislation in that area, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of legal actions are being filed, as firms observe each other, and private equity bankroll lawsuits in exchange for a share of the awards. The result? National sovereignty and democracy are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the choices made by legislatures is that this stipulation has been written – without democratic mandate, and frequently under a climate of extreme secrecy – into international trade agreements.

A Concrete Example: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The justice determined that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, were wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have zero effect on national carbon targets. The new government then withdrew the consent the Tories had granted. Today, this legal outcome faces being overturned by an offshore tribunal reporting to exclusively the entities filing the suit.

Last August, a company whose final controllers are based in the Cayman Islands filed a lawsuit against the UK government. Last week a dispute settlement body in Washington DC was established to hear it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had received permission to go ahead. The public has no clear indication how much this could amount to. What legal team is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a overseas corporation contests it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Case

On the same day that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case to date, but it seems likely that he may employ the tribunal to fight the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has previously started suing another European state on these grounds, seeking a colossal sum: half that nation's yearly budget. Part of the lawyers on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists contend that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments may be obstructing the finance Ukraine desperately needs.

False Assurances and Escalating Threats

Politicians promised that such things were not possible. Previously, a former prime minister, championing the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” A consultant on this topic accused critics of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies begin to understand the authority they now possess, they will turn their attention from the weak nations to the developed economies” were greeted by general mockery.

That prediction is now a reality. This year, fossil fuel and mining firms have lodged a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have to date won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP