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What is your perceive our democratic process works? Maybe similar to this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation is upheld by the courts. That's it. Yet, that was how it once functioned. No longer.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, or the oligarchs who own them, can sue nation states for the laws they pass, at offshore tribunals composed of corporate lawyers. The cases take place in secret. Differing from national judiciaries, these tribunals allow no avenue for appeal or judicial review. You or I are unable to file a case to them, just as our government, or even businesses operating from this country. The door is open exclusively to corporations based overseas.

When a secret court rules that a legislative action may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

These sums represent not tangible damages but funds the tribunal officials decide the company could potentially have made. The state could be forced to abandon its policy. It will be hesitant to enacting future policies along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Historically high figures of legal actions are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The result? Democratic sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the decisions enacted by elected bodies is that this provision has been incorporated – without democratic mandate, and frequently under conditions of extreme secrecy – within trade treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the senior court. The judge ruled that plans to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the licence the Tories had approved. Now, this success could be compromised by an foreign court reporting to only the companies bringing the case.

During August, a company whose final controllers are located in the tax haven filed a lawsuit against the UK government. Recently a arbitration panel in Washington DC was established to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. What legal team is acting on its behalf against the UK administration? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The administration enacts a policy, the domestic court upholds it, then a foreign company contests it through an secretive private court, and a elected official represents its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it seems likely that he will utilise the tribunal to challenge the penalties the UK imposed on him following the war in Ukraine. He has filed a claim against a small nation for this reason, demanding sixteen billion dollars: half that government’s yearly income. Among the lawyers on his side? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen state funds as guarantee for its financial support package is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

We were assured that such things wouldn’t happen. Previously, a former prime minister, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade agreement upon trade deal and there has never been a case in the past.” An adviser on this issue accused campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by such legal actions. Predictions that “as corporations begin to understand the authority they now possess, they will redirect their efforts from the poorer states to the developed economies” were dismissed with scepticism.

That warning is now a reality. In the current period, oil and gas and extraction companies have lodged a historic level of claims against nations both wealthy and developing, contesting – as in the case of the UK mine – government attempts to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP