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Can you reckon our democratic process functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. Legislation are enforced by the courts. Simple as that. Yet, that’s how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

Today, international firms, along with the billionaires who own them, can sue nation states for the policies they pass, at private courts staffed by corporate lawyers. The cases are conducted away from public scrutiny. In contrast to domestic courts, these tribunals provide no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. Access is granted exclusively to corporations operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions, potentially billions.

These sums represent not actual losses but money the panel members decide the company could potentially have made. The state could be forced to drop the legislation. It will be deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of legal actions are being filed, as corporations observe each other, and investment funds finance suits in return for a cut of the awards. The consequence? National sovereignty and popular rule are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under conditions of extreme secrecy – within trade treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the senior court. The presiding officer determined that schemes to open the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine could have no consequence on national carbon targets. The new government then withdrew the licence the former government had issued. Today, this success could be compromised by an secret arbitration panel accountable to only the companies petitioning it.

During August, a corporate entity whose final controllers are based in the Cayman Islands filed a lawsuit versus the UK government. Recently a tribunal in the United States was set up to adjudicate on it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had received permission to proceed. We have little idea how much this sum represents. What legal team is representing it in opposition to the British government? A sitting MP, and ex-law officer in the previous government, that great patriot the MP. The administration passes a law, the domestic court upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK imposed on him following the Russian aggression. He has filed a claim against a small nation on these grounds, claiming $16bn: an amount representing half nation's yearly budget. Part of the counsel on his side? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its financial support package is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Risks

Politicians promised that these scenarios were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has never been a issue 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 solely developing countries needed to fear such legal actions. Predictions that “when companies grasp the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That prediction has now materialised. Recently, fossil fuel and resource corporations have filed a historic level of cases against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – government attempts to stop climate breakdown. Corporations have so far won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP