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What is your understand our democratic process operates? Maybe something like this. We elect MPs. They vote on bills. When a majority is secured, the bills become law. Legislation is upheld by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Rise of Shadow Tribunals

In the modern era, overseas companies, or the wealthy individuals behind them, can sue nation states for the regulations they pass, at private courts made up of commercial attorneys. Such disputes are conducted behind closed doors. Unlike our courts, these panels grant no opportunity to appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even companies based in this country. They are open only to businesses based overseas.

If a tribunal rules that a legislative action might diminish the corporation’s projected profits, it may order compensation of vast sums, even billions.

This compensation represent not real financial harm but money the arbitrators decide the company could potentially have made. The state could be forced to rescind the measure. It will be deterred from enacting future policies in that area, worried about facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being initiated, as companies observe each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The outcome? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the rulings taken by parliaments is that this stipulation has been incorporated – without public consent, and frequently under conditions of extreme secrecy – into international trade agreements.

A Specific Case: The Whitehaven Coalmine

Last year, activists won a great victory at the High Court. The justice ruled that plans to excavate the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine could have zero effect on our carbon budgets. The Labour government subsequently revoked the consent the previous administration had granted. Now, this victory faces being overturned by an foreign court answering to only the corporations petitioning it.

Last August, a corporate entity whose final controllers reside in the tax haven lodged a claim challenging the UK government. Last week a tribunal in the US capital was established to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had been permitted to proceed. We have little idea how much this might be. Who is representing it challenging the British government? A member of parliament, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the domestic court supports it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coal mine dispute was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case so far, but it appears probable that he may employ the ISDS mechanism to fight the penalties the UK enacted against him after the Russian aggression. He has already filed a claim against a small nation for this reason, seeking a colossal sum: an amount representing half nation's yearly budget. Included in the counsel on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen state funds as collateral for its financial support package stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

Empty Promises and Growing Risks

The public was told that such things could not occur. In 2014, a former prime minister, promoting the largest and riskiest of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An expert on this issue described critics of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by such legal actions. Predictions that “when companies grasp the authority they’ve been granted, they will turn their attention from the poorer states to the developed economies” were met with scepticism.

That prediction has come to pass. In the current period, energy and mining firms have filed a historic level of suits against nations rich and poor, contesting – like the example of the Cumbrian coalmine – official measures to halt global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP