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What is your reckon our democratic process works? Perhaps along the lines of this. We elect MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that was how it operated in the past. No longer.

The Advent of Shadow Courts

In the modern era, foreign corporations, or the oligarchs behind them, can sue governments for the policies they pass, at offshore tribunals composed of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these bodies provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, including companies headquartered in this country. The door is open solely for businesses operating from foreign soil.

Should an arbitration panel finds that a law or policy might diminish the corporation’s projected profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation are based not on tangible damages but compensation the tribunal officials determine the company might otherwise have made. The administration might be compelled to rescind the measure. It is hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of cases are being filed, as companies observe each other, and private equity fund legal actions for a share of a cut of the takings. The outcome? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the choices made by parliaments is that this stipulation has been written – without public consent, and often in a climate of profound opacity – within bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Last year, activists won a great victory at the senior court. The judge determined that schemes to dig the first deep coalmine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine could have zero effect on climate commitments. The new government then withdrew the licence the Tories had issued. Currently, this legal outcome could be compromised by an foreign court answering to only the companies bringing the case.

In August, a corporate entity whose ultimate owners are based in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the United States was established to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to commence operations. We have no idea how much this might be. Who is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot the MP. The government enacts a policy, the national judiciary upholds it, then a international entity disputes it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case to date, but it seems likely that he may employ the arbitration process to contest the restrictions the UK imposed on him subsequent to the Russian aggression. He has started suing a small nation for this reason, claiming a colossal sum: equivalent to half of nation's yearly income. Part of the legal team acting for him in that case? the wife of a former prime minister, married to the previous PM.

International law scholars contend that the EU’s hesitation in using frozen state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations might be preventing the funds Ukraine urgently requires.

Empty Promises and Growing Threats

We were assured that such things could not occur. Years ago, a senior politician, promoting the largest and riskiest of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” A consultant on this topic described campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies start to realise the influence they now possess, they will shift their focus from the poorer states to the wealthy nations” were met with general mockery.

That warning is now a reality. Recently, fossil fuel and resource corporations have filed a unprecedented number of claims against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – official measures to prevent global warming. Corporations have to date won $114bn via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP