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How do you perceive our democratic process functions? Perhaps something like this. We elect MPs. They vote on bills. When a majority is obtained, the bills pass into law. Statutes are enforced by the courts. End of story. However, that was how it operated in the past. Those days are over.

The Advent of Shadow Courts

Today, foreign corporations, or the wealthy individuals who own them, have the power to sue elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes take place behind closed doors. Differing from national judiciaries, these panels provide no right of appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even enterprises headquartered in this country. They are open only to entities operating from foreign soil.

Should an arbitration panel finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums are based not on tangible damages but compensation the arbitrators conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It becomes deterred from passing future laws in that area, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as companies observe each other, and investment funds fund legal actions for a share of a portion of the takings. The outcome? National sovereignty and democratic governance are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the rulings made by legislatures is that this stipulation has been written – without public consent, and frequently under conditions of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, activists won a great victory at the high court. The justice ruled that schemes to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have no consequence on national carbon targets. The Labour government then withdrew the consent the former government had issued. Today, this victory could be compromised by an secret arbitration panel answering to only the corporations bringing the case.

In August, a company whose ultimate owners are located in the Cayman Islands filed a lawsuit versus the UK government. Last week a dispute settlement body in Washington DC was set up to consider the case.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to commence operations. Citizens have no clear indication how much this sum represents. Who is representing it challenging the UK administration? An elected representative, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a foreign company challenges it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coalmine case was established, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it seems likely that he may employ the tribunal to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has previously filed a claim against another European state for this reason, claiming sixteen billion dollars: equivalent to half of state's yearly budget. Among the counsel representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over sovereign states could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Threats

The public was told that these scenarios could not occur. Previously, a government leader, promoting the largest and riskiest of all these agreements, declared: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this matter described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with general mockery.

That prediction is now a reality. Recently, energy and resource corporations have initiated a historic level of suits against nations both wealthy and developing, challenging – like the example of the UK mine – government attempts to stop global warming. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP