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Can you reckon our democratic process functions? Maybe similar to this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills become law. The law is maintained by the courts. End of story. Yet, that was how it operated in the past. Not anymore.

The Emergence of Shadow Arbitration Panels

Nowadays, international firms, along with the billionaires behind them, can sue elected administrations for the policies they pass, at private courts made up of corporate lawyers. These proceedings are held in secret. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. You or I are unable to file a case to them, and neither can our government, including companies headquartered in this country. Access is granted exclusively to entities registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

These awards constitute not actual losses but funds the tribunal officials conclude the company could potentially have made. The administration might be compelled to rescind the measure. It becomes discouraged from passing future laws in that area, for fear of being sued.

A Process Spiralling Out of Control

Historically high figures of cases are being brought, as firms take cues from each other, and investment funds bankroll lawsuits in return for a portion of the awards. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the rulings enacted by elected bodies is that this provision has been inserted – without democratic mandate, and frequently under conditions of profound opacity – inside bilateral investment treaties.

A Real-World Instance: The Whitehaven Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The judge ruled that schemes to open the first major coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the former government had issued. Currently, this victory could be compromised by an secret arbitration panel accountable to exclusively the corporations petitioning it.

In August, a company whose final controllers are based in the tax haven initiated proceedings challenging the UK government. Recently a arbitration panel in the US capital was established to hear it.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had received permission to proceed. The public has no idea how much this might be. Which individual is serving as its counsel challenging the UK administration? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a overseas corporation challenges it through an undemocratic private court, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it is highly possible that he may employ the ISDS mechanism to contest the restrictions the UK imposed on him following the Russian aggression. He has previously initiated proceedings against a small nation for this reason, demanding sixteen billion dollars: equivalent to half of state's yearly budget. Among the legal team on his side? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as guarantee for its financial support package stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over sovereign states could be blocking the money Ukraine critically depends on.

False Assurances and Growing Risks

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, advocating for the largest and riskiest of all these agreements, told us: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this topic described activists of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries needed to fear such legal actions. Cautionary notes that “once firms grasp the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That warning has now materialised. Recently, energy and extraction companies have filed a record number of claims against nations rich and poor, challenging – similar to the Whitehaven project – official measures to stop environmental catastrophe. Companies have so far won $114bn through ISDS, of which oil majors have obtained $84bn. That represents the combined GDP