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Can you understand our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. The law is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. No longer.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, along with the wealthy individuals who own them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by corporate lawyers. The cases take place away from public scrutiny. Unlike our courts, these bodies grant no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises based in this country. They are open exclusively to entities based overseas.

When a secret court determines that a government measure could harm the corporation’s expected profits, it can award financial penalties of hundreds of millions, running into billions.

These awards are based not on actual losses but money the panel members conclude the company would perhaps have made. The state could be forced to drop the legislation. It is hesitant to passing future laws along the same lines, due to the risk of being sued.

A Process Running Rampant

Unprecedented levels of cases are being brought, as firms observe each other, and hedge funds finance suits for a share of a cut of the takings. The consequence? Sovereignty and democracy are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings made by parliaments is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Real-World Instance: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the senior court. The judge determined that plans to excavate the first major coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the questionable argument that the mine would have had zero effect on climate commitments. The new government later cancelled the licence the previous administration had issued. Today, this victory faces being overturned by an secret arbitration panel reporting to exclusively the entities petitioning it.

In August, a corporate entity whose final controllers are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a arbitration panel in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the profits it might have made if the mine had received permission to proceed. Citizens have no idea how much this sum represents. What legal team is acting on its behalf challenging the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a overseas corporation contests it through an secretive private court, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it is highly possible that he will utilise the tribunal to fight the penalties the UK enacted against him following the war in Ukraine. He has already started suing a small nation on these grounds, claiming sixteen billion dollars: half that state's yearly income. Included in the legal team on his side? Cherie Blair, wife of the previous PM.

International law scholars believe that the EU’s hesitation in leveraging immobilised state funds as security for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine desperately needs.

Misleading Claims and Mounting Threats

Politicians promised that these scenarios could not occur. Previously, a former prime minister, advocating for the most significant and hazardous of all these agreements, stated: “Britain has agreed to trade agreement upon trade deal and there has never been a issue in the past.” A consultant on this topic accused activists of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That threat has now materialised. Recently, fossil fuel and extraction companies have initiated a record number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – state efforts to halt global warming. Firms have to date won vast sums by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP