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What is your understand our democratic process operates? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. Statutes are enforced by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, along with the wealthy individuals who own them, can sue nation states for the laws they pass, at private courts composed of corporate lawyers. These proceedings are held away from public scrutiny. Unlike our courts, these tribunals provide no right of appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, including enterprises based in this country. Access is granted solely for corporations registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation are based not on tangible damages but money the tribunal officials conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It will be discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being brought, as firms observe each other, and hedge funds finance suits for a share of a cut of the takings. The outcome? Sovereignty and popular rule are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the rulings made by elected bodies is that this clause has been inserted – without public consent, and typically amid an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Instance: The UK Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The justice ruled that schemes to open the first new deep coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have no consequence on our carbon budgets. The new government then withdrew the consent the Tories had approved. Currently, this legal outcome is under threat by an foreign court reporting to no one but the companies filing the suit.

In August, a company whose ultimate owners reside in the tax haven filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was set up to adjudicate on it.

The company is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. The public has little idea how much this could amount to. Who is acting on its behalf challenging the state? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a international entity challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case to date, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK enacted against him after the Russian aggression. He has already started suing another European state for this reason, seeking a colossal sum: equivalent to half of government’s annual revenue. Part of the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists contend that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over sovereign states could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

Politicians promised that these events were not possible. Years ago, a government leader, championing the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and we have never seen a case in the past.” A consultant on this matter accused campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries should be concerned by these lawsuits. Warnings that “as corporations grasp the authority they now possess, they will turn their attention from the weak nations to the developed economies” were met with widespread derision.

That prediction has come to pass. In the current period, fossil fuel and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, challenging – like the example of the UK mine – official measures to prevent global warming. Companies have thus far won $114bn by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP