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How do you perceive our democratic process functions? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. The law are enforced by the courts. That's it. However, that’s how it once functioned. Not anymore.

The Rise of Shadow Courts

In the modern era, overseas companies, or the oligarchs that control them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of business advocates. Such disputes are held away from public scrutiny. Differing from national judiciaries, these bodies provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even businesses based in this country. They are open solely for entities operating from foreign soil.

If a tribunal rules that a government measure could harm the corporation’s expected profits, it can award financial penalties of hundreds of millions, running into billions.

This compensation are based not on tangible damages but funds the arbitrators conclude the company might otherwise have made. The government might be compelled to rescind the measure. It is deterred from passing future laws of a similar nature, due to the risk of being sued.

A Process Running Rampant

Record numbers of legal actions are being filed, as companies learn from each other, and investment funds fund legal actions in exchange for a portion of the awards. The consequence? National sovereignty and democracy are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices enacted by legislatures is that this provision has been inserted – without democratic mandate, and typically amid conditions of profound opacity – inside bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The presiding officer found that schemes to dig the first major coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the consent the previous administration had issued. Now, this legal outcome could be compromised by an offshore tribunal answering to exclusively the entities bringing the case.

During August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was established to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a overseas corporation challenges it through an unaccountable private court, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case at present, but it appears probable that he will utilise the tribunal to contest the penalties the UK enacted against him after the war in Ukraine. He has previously filed a claim against another European state with similar intent, seeking $16bn: equivalent to half of state's yearly income. Included in the counsel acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Legal experts argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over democratic administrations might be preventing the money Ukraine urgently requires.

Empty Promises and Escalating Risks

We were assured that these scenarios could not occur. In 2014, a government leader, promoting the most significant and hazardous of all such treaties, told us: “We’ve signed trade deal upon trade deal and there has never been a issue in the past.” An adviser on this issue described activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “when companies grasp the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with widespread derision.

That prediction has come to pass. In the current period, fossil fuel and resource corporations have filed a historic level of cases against nations across the economic spectrum, challenging – similar to the UK mine – official measures to prevent environmental catastrophe. Companies have so far won vast sums via ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP