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What is your perceive our democratic process operates? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. End of story. Yet, that was how it used to work. Not anymore.

The Rise of Shadow Courts

In the modern era, international firms, along with the wealthy individuals that control them, can sue governments for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. Access is granted only to businesses operating from foreign soil.

If a tribunal determines that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

This compensation constitute not real financial harm but money the panel members conclude the company could potentially have made. The government might be compelled to drop the legislation. It will be hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being filed, as corporations learn from each other, and hedge funds fund legal actions for a share of a share of the settlements. The result? Sovereignty and popular rule are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings made by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under a climate of profound opacity – within international trade agreements.

A Concrete Case: The UK Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that plans to excavate the first new deep coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the licence the previous administration had issued. Now, this success faces being overturned by an offshore tribunal reporting to no one but the companies bringing the case.

Last August, a corporate entity whose final controllers are based in the tax haven lodged a claim versus the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

This firm is suing the UK for the profits it could have earned if the mine had been allowed to proceed. The public has no idea how much this might be. Which individual is representing it challenging the British government? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a international entity contests it through an unaccountable private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case to date, but it is highly possible that he’ll use the arbitration process to fight the restrictions the UK enacted against him following the war in Ukraine. He has initiated proceedings against Luxembourg for this reason, seeking a colossal sum: an amount representing half state's yearly income. Among the legal team acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen Russian assets as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Escalating Threats

We were assured that such things could not occur. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade agreement upon trade deal and there has not been a case in the past.” An adviser on this topic accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “as corporations start to realise the power bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That prediction has come to pass. Recently, oil and gas and extraction companies have initiated a unprecedented number of suits against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to prevent global warming. Firms 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