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How do you understand our democratic process works? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that was how it used to work. No longer.

The Emergence of Shadow Courts

Nowadays, foreign corporations, along with the oligarchs who own them, can sue nation states for the regulations they pass, at offshore tribunals made up of business advocates. Such disputes take place in secret. In contrast to domestic courts, these panels allow no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, including businesses operating from this country. The door is open solely for entities based overseas.

If a tribunal determines that a government measure could harm the corporation’s expected profits, it has the power to grant damages of vast sums, even billions.

This compensation constitute not real financial harm but money the tribunal officials conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It becomes discouraged from passing future laws along the same lines, worried about being sued.

A Process Running Rampant

Record numbers of legal actions are being initiated, as corporations learn from each other, and investment funds fund legal actions for a share of a cut of the awards. The outcome? National sovereignty and popular rule are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings taken by legislatures is that this provision has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

A year ago, a conservation group secured a significant win at the High Court. The judge found that plans to open the first new deep coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the permission the former government had issued. Now, this legal outcome is under threat by an offshore tribunal answering to exclusively the corporations bringing the case.

During August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to commence operations. We have no idea how much this could amount to. What legal team is serving as its counsel challenging the UK administration? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a overseas corporation contests it through an undemocratic private court, and a elected official works for its behalf.

A Sanctions Case

On the same day that the panel on the coalmine case was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are little of the case to date, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK levied against him subsequent to the war in Ukraine. He has already initiated proceedings against a small nation for this reason, claiming a colossal sum: an amount representing half nation's yearly income. Among the lawyers on his side? Cherie Blair, wife of the previous PM.

Legal experts argue that the EU’s delay in utilising seized state funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Escalating Threats

Politicians promised that these events could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” An expert on this issue accused activists of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear these lawsuits. Warnings that “once firms start to realise the power they now possess, they will shift their focus from the vulnerable countries to the developed economies” were met with scepticism.

That prediction has come to pass. In the current period, fossil fuel and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP