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How do you understand our democratic process works? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills become law. Legislation is upheld by the courts. Simple as that. However, that used to be how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

In the modern era, overseas companies, or the billionaires who own them, are able to litigate against nation states for the laws they pass, at private courts staffed by commercial attorneys. The cases are held in secret. In contrast to domestic courts, these bodies allow no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, or even enterprises operating from this country. The door is open solely for businesses operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it can award compensation of hundreds of millions, running into billions.

This compensation constitute not actual losses but money the tribunal officials determine the company could potentially have made. The administration could be forced to abandon its policy. It becomes hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being brought, as firms learn from each other, and hedge funds fund legal actions in return for a share of the takings. The outcome? Sovereignty and democracy are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the choices made by legislatures is that this stipulation has been written – without democratic mandate, and typically amid a climate of extreme secrecy – inside trade treaties.

A Concrete Example: The Cumbrian Coal Mine

A year ago, a conservation group secured a significant win at the high court. The judge ruled that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the permission the previous administration had granted. Today, this victory could be compromised by an secret arbitration panel answering to only the corporations filing the suit.

Last August, a company whose ultimate owners are located in the tax haven lodged a claim challenging the UK government. Recently a arbitration panel in the United States was convened to consider the case.

This firm is suing the UK for the money it might have made if the mine had received permission to proceed. The public has no clear indication how much this sum represents. Who is acting on its behalf challenging the UK administration? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case to date, but it is highly possible that he may employ the ISDS mechanism to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has initiated proceedings against a small nation for this reason, claiming $16bn: half that nation's yearly income. Among the lawyers on his side? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as guarantee for its financial support package is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states could be blocking the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

Politicians promised that such things were not possible. Previously, a senior politician, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” An expert on this matter described activists of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations should be concerned by 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 developed economies” were greeted by general mockery.

That prediction has come to pass. In the current period, fossil fuel and mining firms have lodged a historic level of claims against nations rich and poor, challenging – like the example of the UK mine – state efforts to halt global warming. Companies have thus far won vast sums through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP