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What is your perceive our democratic process works? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation is maintained by the courts. That's it. Well, that’s how it operated in the past. Those days are over.

The Advent of Shadow Tribunals

In the modern era, overseas companies, or the wealthy individuals that control them, have the power to sue governments for the laws they pass, at offshore tribunals made up of corporate lawyers. The cases are held behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. The door is open only to businesses based overseas.

When a secret court determines that a law or policy may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

This compensation represent not real financial harm but compensation the panel members conclude the company could potentially have made. The state may have to drop the legislation. It will be deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of legal actions are being filed, as companies take cues from each other, and investment funds bankroll lawsuits in exchange for a cut of the awards. The outcome? National sovereignty and democracy are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the choices made by legislatures is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that schemes to dig the first new deep coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the permission the former government had approved. Currently, this victory is under threat by an foreign court accountable to only the corporations filing the suit.

In August, a company whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the US capital was established to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had received permission to proceed. We have no clear indication how much this might be. Which individual is representing it challenging the state? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government enacts a policy, the high court validates it, then a foreign company challenges it through an unaccountable arbitration panel, and a elected official works for its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case at present, but it appears probable that he will utilise the tribunal to challenge the restrictions the UK enacted against him after the invasion of Ukraine. He has previously initiated proceedings against another European state with similar intent, claiming sixteen billion dollars: half that state's annual revenue. Part of the legal team on his side? Cherie Blair, married to the ex-UK leader.

Legal experts argue that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Costs

The public was told that these events could not occur. Previously, a government leader, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” An adviser on this matter accused activists of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms grasp the influence they now possess, they will turn their attention from the poorer states to the strong ones” were dismissed with widespread derision.

That prediction has now materialised. Recently, oil and gas and resource corporations have filed a record number of claims against nations rich and poor, challenging – as in the case of the UK mine – official measures to halt global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP