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How do you perceive our democratic process works? Maybe similar to this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. The law is upheld by the courts. End of story. Yet, that used to be how it used to work. Not anymore.

The Rise of Shadow Tribunals

Today, foreign corporations, or the oligarchs that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of business advocates. These proceedings are held in secret. In contrast to domestic courts, these panels allow no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. The door is open solely for entities operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, running into billions.

These awards constitute not actual losses but compensation the tribunal officials decide the company could potentially have made. The government could be forced to abandon its policy. It is discouraged from passing future laws in that area, due to the risk of being sued.

A Process Growing Exponentially

Unprecedented levels of disputes are being filed, as corporations take cues from each other, and investment funds fund legal actions in return for a cut of the settlements. The result? National sovereignty and democracy are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices enacted by elected bodies is that this stipulation has been incorporated – without public consent, and typically amid a climate of extreme secrecy – within bilateral investment treaties.

A Specific Example: The UK Coal Mine

A year ago, activists won a great victory at the senior court. The justice determined that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The Labour government then withdrew the consent the previous administration had approved. Currently, this success could be compromised by an offshore tribunal reporting to exclusively the corporations petitioning it.

Last August, a firm whose final controllers are located in the Cayman Islands initiated proceedings versus the UK government. Last week a arbitration panel in Washington DC was convened to consider the case.

The company is suing the UK for the revenue it would have generated if the mine had received permission to commence operations. Citizens have no clear indication how much this sum represents. Which individual is representing it against the state? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot the MP. The administration makes a decision, the domestic court supports it, then a foreign company disputes it through an undemocratic private court, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the court on the coalmine case was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case at present, but it is highly possible that he will utilise the arbitration process to contest the restrictions the UK imposed on him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, seeking sixteen billion dollars: half that state's yearly budget. Part of the legal team acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars argue that the EU’s procrastination in using frozen Russian assets as security for its financial support package is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states may be obstructing the money Ukraine urgently requires.

False Assurances and Mounting Costs

Politicians promised that such things were not possible. In 2014, a senior politician, championing the most significant and hazardous of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” A consultant on this topic labelled critics of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “when companies begin to understand the influence they now possess, they will shift their focus from the poorer states to the developed economies” were dismissed with general mockery.

That threat has now materialised. This year, fossil fuel and mining firms have initiated a record number of cases against nations across the economic spectrum, opposing – like the example of the UK mine – state efforts to halt global warming. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP