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Can you understand our democratic process functions? Maybe similar to this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills become law. Statutes is maintained by the courts. That's it. However, that used to be how it used to work. Those days are over.

The Rise of Shadow Tribunals

In the modern era, foreign corporations, along with the wealthy individuals that control them, have the power to sue elected administrations for the laws they pass, at private courts staffed by business advocates. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these tribunals grant no right of appeal or legal review. You or I cannot take a case to them, just as our government, including companies headquartered in this country. Access is granted solely for businesses based overseas.

If a tribunal determines that a legislative action might diminish the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, running into billions.

These awards constitute not actual losses but funds the tribunal officials decide the company might otherwise have made. The administration may have to rescind the measure. It will be hesitant to passing future laws of a similar nature, due to the risk of being sued.

A Process Running Rampant

Historically high figures of legal actions are being filed, as firms observe each other, and private equity finance suits for a share of a share of the awards. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the choices taken by elected bodies is that this clause has been written – without public consent, and typically amid an atmosphere of extreme secrecy – into trade treaties.

A Concrete Case: The UK Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine could have no impact on climate commitments. The new government then withdrew the consent the Tories had approved. Now, this success faces being overturned by an secret arbitration panel reporting to exclusively the corporations filing the suit.

In August, a company whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a arbitration panel in the United States was set up to hear it.

The company is suing the UK for the money it would have generated if the mine had been allowed to go ahead. The public has little idea how much this sum represents. Who is representing it in opposition to the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The administration passes a law, the domestic court supports it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Case

On the same day that the court on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it is highly possible that he’ll use the ISDS mechanism to challenge the sanctions the UK levied against him following the war in Ukraine. He has initiated proceedings against Luxembourg with similar intent, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the counsel on his side? Cherie Blair, wife of the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as security for its aid for Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Costs

We were assured that these events could not occur. In 2014, a former prime minister, advocating for the biggest and most dangerous of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” An expert on this topic accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear these lawsuits. Warnings that “as corporations grasp the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That warning has now materialised. In the current period, fossil fuel and extraction companies have lodged a historic level of claims against nations across the economic spectrum, opposing – similar to the Whitehaven project – government attempts to halt global warming. Companies have so far won vast sums through ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP