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How do you perceive our democratic process operates? It could be similar to this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Rise of Shadow Tribunals

Today, foreign corporations, or the billionaires that control them, are able to litigate against governments for the policies they pass, at secret arbitration panels composed of commercial attorneys. These proceedings take place in secret. Differing from national judiciaries, these bodies grant no right of appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. Access is granted exclusively to corporations operating from foreign soil.

If a tribunal rules that a legislative action may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, running into billions.

This compensation are based not on tangible damages but compensation the panel members decide the company would perhaps have made. The state might be compelled to drop the legislation. It is discouraged from enacting future policies of a similar nature, due to the risk of facing litigation.

A System Running Rampant

Record numbers of disputes are being initiated, as companies learn from each other, and hedge funds finance suits in return for a share of the settlements. The consequence? Democratic sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the choices made by parliaments is that this stipulation has been written – without democratic mandate, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Specific Instance: The Cumbrian Coalmine

A year ago, activists won a great victory at the High Court. The judge found that proposals to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine could have no consequence on national carbon targets. The Labour government subsequently revoked the permission the Tories had granted. Today, this victory could be compromised by an offshore tribunal reporting to exclusively the companies filing the suit.

During August, a firm whose ultimate owners reside in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was set up to consider the case.

The claimant is suing the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no idea how much this might be. Who is representing it against the state? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a international entity challenges it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Case

On the same day that the court on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case so far, but it seems likely that he may employ the arbitration process to challenge the sanctions the UK levied against him after the invasion of Ukraine. He has previously filed a claim against a small nation for this reason, seeking $16bn: half that nation's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Legal experts believe that the EU’s delay in utilising seized Russian assets as collateral for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine urgently requires.

Empty Promises and Escalating Threats

Politicians promised that these scenarios wouldn’t happen. Years ago, a government leader, advocating for the most significant and hazardous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” An expert on this matter labelled campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries should be concerned by these lawsuits. Predictions that “when companies grasp the influence they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That threat is now a reality. This year, oil and gas and resource corporations have filed a unprecedented number of suits against nations rich and poor, challenging – like the example of the Whitehaven project – state efforts to halt climate breakdown. Corporations have to date won $114bn by using ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP