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What is your understand our democratic process functions? It could be along the lines of this. We elect MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. That's it. However, that was how it used to work. Those days are over.

The Rise of Shadow Courts

In the modern era, international firms, and the oligarchs who own them, are able to litigate against governments for the regulations they pass, at private courts staffed by commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these bodies provide no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, including businesses based in this country. Access is granted exclusively to entities based overseas.

When a secret court determines that a government measure could harm the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

These awards constitute not actual losses but compensation the arbitrators determine the company might otherwise have made. The administration might be compelled to rescind the measure. It will be deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of legal actions are being filed, as companies observe each other, and private equity finance suits in exchange for a portion of the awards. The outcome? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the rulings enacted by parliaments is that this clause has been written – without public consent, and often in conditions of profound opacity – within bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

A year ago, activists won a great victory at the High Court. The presiding officer found that proposals to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no impact on climate commitments. The Labour government subsequently revoked the permission the previous administration had issued. Today, this success is under threat by an foreign court reporting to no one but the entities petitioning it.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. Who is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the domestic court supports it, then a overseas corporation disputes it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case to date, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK imposed on him after the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, claiming a colossal sum: half that state's annual revenue. Part of the lawyers acting for him in that case? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as security for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Risks

The public was told that these events could not occur. Years ago, a government leader, championing the most significant and hazardous of all investment pacts, stated: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this issue accused activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “as corporations begin to understand the power they now possess, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That prediction is now a reality. In the current period, energy and resource corporations have lodged a record number of claims against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to stop global warming. Companies have so far won $114bn through ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP