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How do you perceive our democratic process works? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. However, that was how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

Nowadays, overseas companies, and the oligarchs that control them, are able to litigate against governments for the laws they pass, at private courts composed of business advocates. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals grant no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises headquartered in this country. They are open exclusively to entities based overseas.

If a tribunal finds that a law or policy could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These awards represent not actual losses but compensation the arbitrators decide the company could potentially have made. The government could be forced to drop the legislation. It will be discouraged from enacting future policies of a similar nature, due to the risk of being sued.

A Process Running Rampant

Historically high figures of disputes are being brought, as firms take cues from each other, and hedge funds bankroll lawsuits in return for a share of the takings. The result? Democratic sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions taken by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under an atmosphere of extreme secrecy – within trade treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the High Court. The judge found that plans to excavate the first major coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government subsequently revoked the permission the Tories had approved. Today, this victory is under threat by an foreign court answering to exclusively the entities petitioning it.

During August, a firm whose beneficial owners reside in the Cayman Islands initiated proceedings against the UK government. Last week a dispute settlement body in Washington DC was set up to consider the case.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to commence operations. The public has no clear indication how much this might be. Who is acting on its behalf in opposition to the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the high court supports it, then a foreign company contests it through an secretive private court, and a elected official works for its behalf.

A Sanctions Case

Concurrently that the panel on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, 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 penalties the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against another European state for this reason, demanding a colossal sum: half that state's yearly income. Among the lawyers on his side? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over sovereign states may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Escalating Costs

The public was told that such things could not occur. Previously, a former prime minister, advocating for the most significant and hazardous of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this topic described critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states had to worry about such legal actions. Predictions that “as corporations grasp the influence bestowed upon them, they will shift their focus from the poorer states to the developed economies” were dismissed with general mockery.

That prediction is now a reality. In the current period, oil and gas and mining firms have initiated a historic level of claims against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – official measures to halt global warming. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP