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Can you perceive our democratic process works? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. That's it. Well, that was how it once functioned. No longer.

The Advent of Shadow Courts

Nowadays, foreign corporations, or the billionaires behind them, can sue elected administrations for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held away from public scrutiny. Unlike our courts, these bodies allow no right of appeal or oversight by judges. The general public cannot take a case to them, just as our government, including businesses based in this country. The door is open solely for corporations registered abroad.

If a tribunal rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, running into billions.

These awards represent not actual losses but funds the panel members decide the company might otherwise have made. The state could be forced to drop the legislation. It will be deterred from enacting future policies along the same lines, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being filed, as corporations learn from each other, and private equity fund legal actions in exchange for a cut of the takings. The result? Sovereignty and democracy are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices made by legislatures is that this provision has been written – absent public approval, and often in a climate of extreme secrecy – into international trade agreements.

A Real-World Instance: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The presiding officer found that schemes to excavate the first major coal mine in the UK for a generation, in northwest England, were found to be wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine could have no impact on national carbon targets. The new government later cancelled the licence the Tories had issued. Today, this success faces being overturned by an offshore tribunal answering to exclusively the corporations filing the suit.

During August, a firm whose final controllers are located in the tax haven filed a lawsuit versus the UK government. Recently a tribunal in the US capital was established to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to commence operations. Citizens have little idea how much this could amount to. Which individual is serving as its counsel against the UK administration? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the national judiciary supports it, then a foreign company contests it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Case

Concurrently that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case so far, but it is highly possible that he’ll use the arbitration process to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has initiated proceedings against Luxembourg for this reason, claiming $16bn: equivalent to half of nation's annual revenue. Among the counsel representing him there? Cherie Blair, wife of the previous PM.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Risks

We were assured that these events could not occur. In 2014, a former prime minister, championing the biggest and most dangerous of all such treaties, stated: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” An adviser on this matter accused activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “once firms begin to understand the power they’ve been granted, they will shift their focus from the weak nations to the developed economies” were met with scepticism.

That threat has come to pass. In the current period, oil and gas and extraction companies have initiated a record number of suits against nations both wealthy and developing, opposing – as in the case of the UK mine – state efforts to stop environmental catastrophe. Companies have thus far won $114bn via ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP