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What is your reckon our democratic process operates? Perhaps something like this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. End of story. Yet, that used to be how it used to work. Not anymore.

The Rise of Shadow Courts

Nowadays, foreign corporations, and the wealthy individuals behind them, can sue elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or judicial review. The general public are unable to file a case to them, just as our government, or even companies based in this country. They are open only to corporations registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

This compensation constitute not real financial harm but compensation the panel members determine the company might otherwise have made. The administration could be forced to abandon its policy. It is deterred from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Running Rampant

Record numbers of cases are being initiated, as firms take cues from each other, and hedge funds finance suits in exchange for a share of the awards. The outcome? National sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the decisions taken by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Concrete Example: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the senior court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine could have no impact on national carbon targets. The new government then withdrew the permission the Tories had issued. Today, this legal outcome is under threat by an foreign court accountable to no one but the corporations bringing the case.

Last August, a firm whose beneficial owners reside in the tax haven lodged a claim against the UK government. The previous week a tribunal in the United States was convened to adjudicate on it.

The claimant is suing the UK for the revenue it would have generated if the mine had been allowed to proceed. Citizens have no clear indication how much this sum represents. Who is representing it against the British government? A member of parliament, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a overseas corporation challenges it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the court on the coalmine case was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case at present, but it appears probable that he will utilise the ISDS mechanism to challenge the penalties the UK enacted against him after the Russian aggression. He has filed a claim against another European state with similar intent, demanding a colossal sum: an amount representing half nation's yearly income. Among the lawyers acting for him in that case? Cherie Blair, married to the former British prime minister.

International law scholars believe that the EU’s delay in utilising seized state funds as security for its loan to Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Costs

We were assured that these events wouldn’t happen. In 2014, a former prime minister, promoting the most significant and hazardous of all investment pacts, stated: “We’ve signed trade deal upon trade deal and there has not been a case in the past.” An adviser on this matter described critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “when companies grasp the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were greeted by general mockery.

That prediction has come to pass. This year, energy and mining firms have lodged a record number of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – government attempts to stop climate breakdown. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP