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How do you perceive our democratic process operates? Maybe something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. Simple as that. Yet, that used to be how it used to work. No longer.

The Rise of Shadow Courts

Today, international firms, or the billionaires that control them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals composed of commercial attorneys. Such disputes take place away from public scrutiny. Unlike our courts, these bodies provide no opportunity to appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including enterprises based in this country. Access is granted exclusively to entities based overseas.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, running into billions.

This compensation represent not real financial harm but compensation the arbitrators decide the company might otherwise have made. The state might be compelled to rescind the measure. It will be hesitant to introducing similar legislation of a similar nature, for fear of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of cases are being brought, as companies learn from each other, and investment funds finance suits for a share of a cut of the settlements. The result? Sovereignty and popular rule are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions made by legislatures is that this stipulation has been written – without public consent, and typically amid an atmosphere of extreme secrecy – inside international trade agreements.

A Specific Instance: The UK Coalmine

A year ago, a conservation group won a great victory at the senior court. The justice determined that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, were illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine would have had zero effect on national carbon targets. The Labour government subsequently revoked the consent the Tories had issued. Currently, this victory could be compromised by an foreign court answering to exclusively the corporations filing the suit.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was set up to adjudicate on it.

The company is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. We have no clear indication how much this could amount to. Who is representing it against the UK administration? A sitting MP, and former attorney-general in the outgoing administration, that great patriot the MP. The state makes a decision, the domestic court validates it, then a international entity contests it through an unaccountable private court, and a elected official represents its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to challenge the sanctions the UK levied against him following the Russian aggression. He has already started suing another European state for this reason, demanding sixteen billion dollars: equivalent to half of nation's yearly income. Included in the counsel representing him there? a prominent lawyer, spouse of the former British prime minister.

Legal experts argue that the EU’s hesitation in using frozen state funds as security for its financial support package stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

False Assurances and Escalating Threats

The public was told that such things could not occur. Years ago, a government leader, championing the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this matter labelled critics of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear these lawsuits. Warnings that “as corporations begin to understand the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That prediction has now materialised. This year, oil and gas and mining firms have initiated a historic level of cases against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – government attempts to halt environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP