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What is your reckon our democratic process operates? It could be something like this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. The law are enforced by the courts. End of story. Well, that’s how it operated in the past. No longer.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, along with the oligarchs behind them, have the power to sue elected administrations for the regulations they pass, at private courts made up of business advocates. These proceedings are held away from public scrutiny. Unlike our courts, these tribunals grant no opportunity to appeal or legal review. The general public cannot take a case to them, nor can our government, or even companies headquartered in this country. Access is granted only to corporations based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it can award damages of vast sums, potentially billions.

This compensation represent not real financial harm but compensation the arbitrators conclude the company would perhaps have made. The government may have to rescind the measure. It becomes hesitant to passing future laws of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being filed, as corporations take cues from each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The consequence? National sovereignty and democratic governance are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the rulings taken by legislatures is that this provision has been inserted – without public consent, and typically amid conditions of profound opacity – into bilateral investment treaties.

A Specific Case: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice determined that proposals to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have had no impact on climate commitments. The Labour government subsequently revoked the permission the previous administration had approved. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the entities filing the suit.

During August, a firm whose beneficial owners are located in the tax haven filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was set up to consider the case.

The company is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. The public has no idea how much this might be. Which individual is acting on its behalf against the state? A sitting MP, and former attorney-general in the Conservative government, the noted patriot the MP. The state enacts a policy, the high court upholds it, then a overseas corporation challenges it through an secretive private court, and a sitting MP acts on its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was established, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he will utilise the tribunal to fight the penalties the UK levied against him following the invasion of Ukraine. He has filed a claim against a small nation for this reason, claiming a colossal sum: half that government’s yearly income. Among the lawyers on his side? the wife of a former prime minister, wife of the former British prime minister.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its financial support package arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over democratic administrations may be obstructing the finance Ukraine urgently requires.

Empty Promises and Escalating Costs

Politicians promised that these scenarios wouldn’t happen. Years ago, a government leader, championing the largest and riskiest of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” An expert on this topic described campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “as corporations grasp the influence they now possess, they will shift their focus from the weak nations to the developed economies” were greeted by general mockery.

That prediction has come to pass. In the current period, oil and gas and resource corporations have initiated a record number of claims against nations both wealthy and developing, contesting – similar to the Whitehaven project – state efforts to halt global warming. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP