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What is your understand our democratic process works? Maybe similar to this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills pass into law. The law is maintained by the courts. That's it. Well, that was how it operated in the past. No longer.

The Emergence of Shadow Courts

Today, international firms, or the wealthy individuals behind them, are able to litigate against nation states for the laws they pass, at private courts staffed by corporate lawyers. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these tribunals grant no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises operating from this country. Access is granted exclusively to entities based overseas.

When a secret court finds that a legislative action might diminish the corporation’s projected profits, it can award financial penalties of vast sums, even billions.

This compensation are based not on tangible damages but funds the arbitrators decide the company might otherwise have made. The administration could be forced to rescind the measure. It will be discouraged from passing future laws of a similar nature, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being initiated, as firms learn from each other, and hedge funds finance suits for a share of a cut of the settlements. The consequence? Democratic sovereignty and popular rule are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the decisions taken by legislatures is that this provision has been inserted – without democratic mandate, and typically amid conditions of profound opacity – inside bilateral investment treaties.

A Specific Instance: The UK Coalmine

Last year, activists secured a significant win at the High Court. The judge found that proposals to open the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the licence the former government had granted. Currently, this victory faces being overturned by an offshore tribunal reporting to exclusively the corporations filing the suit.

During August, a corporate entity whose ultimate owners reside in the Cayman Islands lodged a claim against the UK government. Last week a dispute settlement body in the US capital was convened to consider the case.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to commence operations. We have no clear indication how much this could amount to. Who is representing it challenging the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a foreign company contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case at present, but it appears probable that he may employ the tribunal to fight the restrictions the UK enacted against him after the Russian aggression. He has started suing another European state with similar intent, claiming sixteen billion dollars: half that nation's yearly income. Included in the legal team on his side? a prominent lawyer, married to the previous PM.

Legal experts believe that the EU’s procrastination in using frozen state funds as guarantee for its financial support package stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the funds Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that these scenarios could not occur. Years ago, a senior politician, promoting the largest and riskiest of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this matter accused critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That warning is now a reality. This year, fossil fuel and mining firms have initiated a record number of cases against nations across the economic spectrum, challenging – similar to the Whitehaven project – state efforts to prevent climate breakdown. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP