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What is your perceive our democratic process operates? Maybe something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. The law is upheld by the courts. End of story. However, that’s how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, or the billionaires who own them, are able to litigate against governments for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held away from public scrutiny. Differing from national judiciaries, these bodies provide no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even companies based in this country. They are open solely for corporations based overseas.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it can award financial penalties of vast sums, potentially billions.

These awards constitute not actual losses but money the tribunal officials conclude the company might otherwise have made. The government could be forced to abandon its policy. It becomes discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being brought, as firms learn from each other, and investment funds bankroll lawsuits in return for a share of the settlements. The consequence? Democratic sovereignty and democracy are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the decisions taken by legislatures is that this provision has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – into trade treaties.

A Concrete Instance: The Cumbrian Coalmine

A year ago, activists secured a significant win at the high court. The justice found that plans to excavate the first major coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have zero effect on our carbon budgets. The incoming administration later cancelled the permission the previous administration had approved. Today, this legal outcome faces being overturned by an offshore tribunal accountable to only the corporations filing the suit.

Last August, a company whose ultimate owners are located in the Cayman Islands filed a lawsuit versus the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

The claimant is suing the UK for the profits it could have earned if the mine had received permission to commence operations. Citizens have no idea how much this could amount to. What legal team is acting on its behalf in opposition to the state? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The government makes a decision, the high court upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the coalmine case was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case so far, but it appears probable that he may employ the tribunal to fight the restrictions the UK levied against him after the invasion of Ukraine. He has previously started suing another European state on these grounds, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised Russian assets as collateral for its financial support package stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that such things wouldn’t happen. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” An expert on this issue accused activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “when companies grasp the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were met with widespread derision.

That threat has come to pass. In the current period, fossil fuel and mining firms have lodged a unprecedented number of suits against nations rich and poor, opposing – like the example of the UK mine – official measures to prevent environmental catastrophe. Firms have so far won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP