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What is your perceive our democratic process operates? Perhaps similar to this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it operated in the past. Not anymore.

The Rise of Shadow Tribunals

Nowadays, foreign corporations, along with the wealthy individuals that control them, have the power to sue nation states for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are conducted behind closed doors. Differing from national judiciaries, these bodies allow no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

These sums constitute not real financial harm but funds the tribunal officials conclude the company could potentially have made. The administration may have to abandon its policy. It becomes hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as corporations learn from each other, and investment funds fund legal actions in exchange for a share of the awards. The consequence? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions enacted by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – within bilateral investment treaties.

A Real-World Case: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The presiding officer determined that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on national carbon targets. The Labour government later cancelled the consent the previous administration had issued. Now, this legal outcome is under threat by an secret arbitration panel answering to exclusively the companies petitioning it.

During August, a corporate entity whose beneficial owners reside in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in the United States was set up to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had received permission to proceed. We have no clear indication how much this could amount to. Which individual is representing it in opposition to the UK administration? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the high court validates it, then a foreign company contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case so far, but it is highly possible that he will utilise the arbitration process to fight the restrictions the UK enacted against him following the Russian aggression. He has previously started suing Luxembourg with similar intent, seeking sixteen billion dollars: half that state's yearly budget. Included in the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised Russian assets as security for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over sovereign states might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that these scenarios could not occur. In 2014, a government leader, championing the largest and riskiest of all such treaties, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this topic labelled critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies start to realise the influence they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning has come to pass. This year, fossil fuel and mining firms have filed a historic level of claims against nations across the economic spectrum, challenging – like the example of the UK mine – state efforts to stop environmental catastrophe. Firms have thus far won vast sums via ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP