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Can you reckon our democratic process operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Rise of Shadow Tribunals

Nowadays, international firms, along with the oligarchs that control them, can sue nation states for the policies they pass, at private courts composed of corporate lawyers. These proceedings are held away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or judicial review. You or I cannot take a case to them, just as our government, or even businesses operating from this country. Access is granted solely for entities based overseas.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation are based not on actual losses but funds the arbitrators decide the company would perhaps have made. The administration might be compelled to drop the legislation. It is discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The outcome? National sovereignty and democratic governance are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the choices taken by elected bodies is that this stipulation has been incorporated – without public consent, and often in a climate of total confidentiality – within international trade agreements.

A Real-World Example: The UK Coalmine

Last year, a conservation group achieved a major legal triumph at the High Court. The presiding officer found that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The new government then withdrew the permission the Tories had issued. Today, this success could be compromised by an secret arbitration panel accountable to no one but the corporations petitioning it.

During August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. Recently a arbitration panel in Washington DC was established to hear it.

The company is suing the UK for the revenue it might have made if the mine had been permitted to proceed. We have little idea how much this sum represents. Which individual is representing it challenging the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The state passes a law, the national judiciary supports it, then a foreign company contests it through an undemocratic private court, and a member of our parliament works for its behalf.

A Sanctions Case

Concurrently that the panel on the mining lawsuit was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case at present, but it seems likely that he may employ the tribunal to challenge the restrictions the UK enacted against him following the Russian aggression. He has already started suing another European state with similar intent, claiming $16bn: half that nation's annual revenue. Included in the counsel on his side? a prominent lawyer, married to the ex-UK leader.

Legal experts believe that the EU’s hesitation in using frozen state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over sovereign states may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Growing Risks

Politicians promised that these events could not occur. Years ago, a government leader, promoting the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” An expert on this topic described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “once firms start to realise the authority they now possess, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That threat has now materialised. In the current period, oil and gas and extraction companies have filed a unprecedented number of cases against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP