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How do you perceive our democratic process works? Maybe something like this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Statutes is upheld by the courts. End of story. Well, that used to be how it used to work. Not anymore.

The Advent of Shadow Courts

In the modern era, foreign corporations, and the billionaires who own them, have the power to sue nation states for the laws they pass, at private courts made up of business advocates. These proceedings are held behind closed doors. Unlike our courts, these bodies provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even companies based in this country. The door is open solely for corporations based overseas.

If a tribunal determines that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These awards represent not tangible damages but funds the tribunal officials conclude the company might otherwise have made. The administration might be compelled to drop the legislation. It is deterred from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies take cues from each other, and private equity bankroll lawsuits in return for a portion of the awards. The result? Democratic sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the decisions made by legislatures is that this stipulation has been written – without public consent, and frequently under conditions of total confidentiality – inside trade treaties.

A Specific Case: The UK Coal Mine

A year ago, activists won a great victory at the High Court. The judge found that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on climate commitments. The new government subsequently revoked the licence the former government had issued. Now, this victory is under threat by an foreign court answering to no one but the companies bringing the case.

During August, a corporate entity whose final controllers reside in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in the United States was set up to hear it.

The company is suing the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. Which individual is representing it in opposition to the state? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The administration makes a decision, the high court supports it, then a international entity disputes it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Case

Concurrently that the court on the coalmine case was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he will utilise the tribunal to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has started suing Luxembourg with similar intent, demanding $16bn: half that government’s annual revenue. Part of the counsel on his side? a prominent lawyer, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in using frozen Russian assets as guarantee for its financial support package arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over democratic administrations may be obstructing the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these events could not occur. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic accused campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by ISDS claims. Warnings that “as corporations grasp the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with general mockery.

That threat is now a reality. Recently, fossil fuel and resource corporations have initiated a historic level of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have to date won $114bn through ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP