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How do you understand our democratic process operates? Perhaps something like this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Rise of Shadow Courts

Today, overseas companies, along with the billionaires that control them, have the power to sue elected administrations for the laws they pass, at private courts composed of corporate lawyers. The cases take place away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, or even businesses based in this country. The door is open exclusively to businesses registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards represent not tangible damages but compensation the panel members conclude the company might otherwise have made. The administration could be forced to abandon its policy. It will be discouraged from passing future laws of a similar nature, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of disputes are being filed, as firms learn from each other, and private equity finance suits in return for a portion of the takings. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the choices enacted by parliaments is that this stipulation has been written – absent public approval, and frequently under a climate of profound opacity – within trade treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The justice determined that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine could have zero effect on climate commitments. The incoming administration later cancelled the consent the previous administration had granted. Currently, this legal outcome is under threat by an offshore tribunal answering to exclusively the companies bringing the case.

During August, a company whose beneficial owners reside in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in Washington DC was established to hear it.

The company is seeking compensation from the UK for the money it would have generated if the mine had been permitted to proceed. We have little idea how much this might be. What legal team is acting on its behalf challenging the state? A sitting MP, and former attorney-general in the previous government, that great patriot the MP. The state makes a decision, the national judiciary upholds it, then a overseas corporation contests it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case so far, but it seems likely that he’ll use the ISDS mechanism to contest the penalties the UK imposed on him after the Russian aggression. He has already filed a claim against another European state for this reason, seeking sixteen billion dollars: equivalent to half of government’s annual revenue. Included in the counsel acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists contend that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over elected governments could be blocking the money Ukraine critically depends on.

Empty Promises and Growing Risks

The public was told that these scenarios wouldn’t happen. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” An expert on this topic described activists of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about these lawsuits. Warnings that “as corporations begin to understand the power they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That prediction has now materialised. In the current period, energy and resource corporations have filed a record number of suits against nations rich and poor, challenging – similar to the UK mine – government attempts to prevent environmental catastrophe. Firms have to date won vast sums via ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP