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What is your reckon our democratic process operates? It could be something like this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills become law. Legislation is maintained by the courts. That's it. Well, that was how it once functioned. Not anymore.

The Advent of Shadow Tribunals

Nowadays, overseas companies, or the oligarchs who own them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of commercial attorneys. Such disputes take place in secret. Unlike our courts, these bodies provide no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even companies operating from this country. Access is granted solely for businesses registered abroad.

When a secret court determines that a legislative action could harm the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation constitute not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The state could be forced to drop the legislation. It will be deterred from enacting future policies in that area, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of cases are being filed, as companies take cues from each other, and investment funds fund legal actions in return for a share of the takings. The consequence? Sovereignty and democracy are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the decisions made by legislatures is that this stipulation has been written – without public consent, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Real-World Example: The UK Coalmine

Last year, activists won a great victory at the High Court. The justice ruled that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine could have no impact on national carbon targets. The Labour government later cancelled the licence the Tories had approved. Now, this legal outcome is under threat by an secret arbitration panel reporting to only the corporations filing the suit.

In August, a company whose ultimate owners are located in the tax haven filed a lawsuit versus the UK government. Last week a dispute settlement body in the US capital was established to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had been permitted to commence operations. We have no clear indication how much this sum represents. Which individual is representing it in opposition to the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a elected official acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it appears probable that he will utilise the arbitration process to contest the sanctions the UK imposed on him after the war in Ukraine. He has previously started suing a small nation for this reason, demanding sixteen billion dollars: an amount representing half state's yearly budget. Included in the lawyers representing him there? a prominent lawyer, spouse of the former British prime minister.

Trade specialists believe that the EU’s delay in utilising seized oligarchs' funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over democratic administrations could be blocking the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that these events could not occur. Previously, a former prime minister, promoting the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” A consultant on this issue accused campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “as corporations begin to understand the authority they now possess, they will shift their focus from the poorer states to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. This year, oil and gas and extraction companies have lodged a historic level of claims against nations both wealthy and developing, contesting – similar to the Whitehaven project – government attempts to halt environmental catastrophe. Firms have thus far won $114bn through ISDS, of which energy giants have secured the majority. That equates to the combined GDP