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Can you perceive our democratic process operates? It could be along the lines of this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. End of story. Yet, that was how it used to work. Not anymore.

The Emergence of Shadow Courts

Today, overseas companies, or the oligarchs behind them, have the power to sue governments for the laws they pass, at offshore tribunals composed of commercial attorneys. Such disputes take place in secret. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even companies headquartered in this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court finds that a government measure may compromise the corporation’s expected profits, it may order compensation of vast sums, even billions.

These awards are based not on tangible damages but funds the panel members determine the company might otherwise have made. The government may have to drop the legislation. It becomes discouraged from enacting future policies along the same lines, for fear of being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being initiated, as corporations learn from each other, and private equity finance suits in return for a cut of the settlements. The consequence? National sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the rulings enacted by legislatures is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of profound opacity – within trade treaties.

A Real-World Case: The UK Coalmine

A year ago, a conservation group won a great victory at the senior court. The justice ruled that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The incoming administration then withdrew the licence the former government had issued. Currently, this legal outcome is under threat by an offshore tribunal reporting to no one but the corporations bringing the case.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands lodged a claim against the UK government. The previous week a tribunal in Washington DC was established to hear it.

This firm is suing the UK for the revenue it would have generated if the mine had received permission to commence operations. Citizens have no idea how much this sum represents. What legal team is representing it challenging the state? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Geoffrey Cox. The administration passes a law, the high court supports it, then a international entity disputes it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Case

On the same day that the tribunal on the coalmine case was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it seems likely that he may employ the ISDS mechanism to fight the sanctions the UK levied against him subsequent to the war in Ukraine. He has already filed a claim against Luxembourg on these grounds, seeking a colossal sum: half that nation's yearly budget. Included in the legal team acting for him in that case? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s delay in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the money Ukraine desperately needs.

Misleading Claims and Growing Threats

Politicians promised that such things were not possible. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” An expert on this issue accused critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “once firms grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction has now materialised. This year, fossil fuel and extraction companies have initiated a historic level of cases against nations rich and poor, challenging – similar to the UK mine – official measures to halt global warming. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP