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How do you understand our democratic process functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes is maintained by the courts. End of story. However, that used to be how it once functioned. Not anymore.

The Advent of Shadow Courts

Today, international firms, or the wealthy individuals who own them, are able to litigate against governments for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place behind closed doors. Unlike our courts, these panels provide no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including enterprises operating from this country. The door is open only to entities registered abroad.

When a secret court finds that a legislative action may compromise the corporation’s expected profits, it may order compensation of vast sums, potentially billions.

This compensation represent not tangible damages but funds the arbitrators determine the company could potentially have made. The administration might be compelled to rescind the measure. It will be hesitant to passing future laws of a similar nature, due to the risk of being sued.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as companies take cues from each other, and private equity fund legal actions in return for a share of the takings. The result? Sovereignty and popular rule are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices enacted by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under conditions of extreme secrecy – inside trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The justice found that plans to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the consent the Tories had approved. Now, this victory could be compromised by an secret arbitration panel accountable to only the corporations bringing the case.

During August, a company whose beneficial owners reside in the tax haven filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had been permitted to proceed. The public has little idea how much this sum represents. What legal team is serving as its counsel against the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a international entity disputes it through an secretive arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case to date, but it appears probable that he’ll use the ISDS mechanism to fight the penalties the UK enacted against him following the Russian aggression. He has previously filed a claim against another European state on these grounds, seeking sixteen billion dollars: an amount representing half nation's yearly budget. Among the counsel acting for him in that case? a prominent lawyer, married to the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that such things could not occur. In 2014, a former prime minister, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty after trade deal and we have never seen a case in the past.” An adviser on this topic labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “once firms start to realise the power they’ve been granted, they will turn their attention from the weak nations to the strong ones” were dismissed with general mockery.

That warning is now a reality. Recently, oil and gas and mining firms have lodged a unprecedented number of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have thus far won vast sums by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP