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How do you understand our democratic process functions? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. The law are enforced by the courts. That's it. However, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Courts

Nowadays, international firms, 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. Such disputes take place away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies headquartered in this country. Access is granted exclusively to businesses based overseas.

Should an arbitration panel determines that a government measure may compromise the corporation’s expected profits, it may order damages of vast sums, potentially billions.

These awards represent not actual losses but money the tribunal officials determine the company would perhaps have made. The administration may have to abandon its policy. It becomes deterred from introducing similar legislation in that area, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of disputes are being brought, as firms learn from each other, and hedge funds fund legal actions in return for a share of the takings. The consequence? Democratic sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices made by parliaments is that this provision has been written – without public consent, and frequently under an atmosphere of profound opacity – within international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the high court. The justice found that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The new government subsequently revoked the consent the previous administration had issued. Today, this victory faces being overturned by an secret arbitration panel answering to no one but the entities petitioning it.

Last August, a corporate entity whose beneficial owners are based in the tax haven filed a lawsuit challenging the UK government. Recently a arbitration panel in the United States was set up to consider the case.

The company is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. The public has little idea how much this could amount to. Who is representing it challenging the UK administration? A member of parliament, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The state passes a law, the national judiciary supports it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case to date, but it appears probable that he will utilise the tribunal to contest the penalties the UK imposed on him after the war in Ukraine. He has previously started suing a small nation with similar intent, seeking sixteen billion dollars: an amount representing half state's yearly budget. Among the legal team on his side? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s delay in using frozen Russian assets as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Risks

Politicians promised that these scenarios could not occur. In 2014, a government leader, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty upon trade deal and there has not been a problem in the past.” An adviser on this matter accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear such legal actions. Predictions that “once firms begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the developed economies” were greeted by general mockery.

That warning has now materialised. This year, oil and gas and extraction companies have lodged a unprecedented number of suits against nations rich and poor, opposing – as in the case of the UK mine – official measures to stop global warming. Companies have to date won vast sums through ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP