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How do you understand our democratic process operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. That's it. However, that’s how it once functioned. Those days are over.

The Advent of Shadow Courts

Today, overseas companies, and the wealthy individuals behind them, can sue governments for the policies they pass, at offshore tribunals staffed by business advocates. The cases take place away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, including companies headquartered in this country. Access is granted exclusively to entities based overseas.

When a secret court determines that a legislative action could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but money the tribunal officials decide the company could potentially have made. The state may have to drop the legislation. It is deterred from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of legal actions are being filed, as firms learn from each other, and private equity fund legal actions for a share of a portion of the settlements. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices taken by elected bodies is that this clause has been written – absent public approval, and typically amid a climate of profound opacity – inside trade treaties.

A Concrete Example: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge ruled that schemes to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have zero effect on our carbon budgets. The incoming administration later cancelled the licence the former government had issued. Currently, this success faces being overturned by an secret arbitration panel reporting to exclusively the entities petitioning it.

Last August, a firm whose ultimate owners reside in the tax haven filed a lawsuit versus the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had been allowed to commence operations. The public has no idea how much this might be. Which individual is serving as its counsel challenging the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company challenges it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case to date, but it seems likely that he will utilise the arbitration process to fight the sanctions the UK levied against him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, claiming a colossal sum: equivalent to half of state's yearly budget. Among the counsel on his side? the wife of a former prime minister, married to the former British prime minister.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine critically depends on.

Empty Promises and Mounting Threats

The public was told that these scenarios wouldn’t happen. Years ago, a government leader, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal upon trade deal and we have never seen a case in the past.” A consultant on this issue accused activists of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations grasp the influence bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were met with general mockery.

That prediction has come to pass. This year, fossil fuel and mining firms have initiated a record number of suits against nations rich and poor, contesting – as in the case of the UK mine – state efforts to stop climate breakdown. Companies have to date won vast sums through ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP