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How do you reckon our democratic process functions? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. The law is maintained by the courts. Simple as that. Well, that’s how it used to work. Those days are over.

The Advent of Shadow Courts

In the modern era, international firms, or the billionaires that control them, have the power to sue governments for the policies they pass, at private courts staffed by commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no opportunity to appeal or legal review. The general public are unable to file a case to them, just as our government, or even enterprises operating from this country. They are open only to businesses based overseas.

When a secret court rules that a legislative action could harm the corporation’s anticipated profits, it can award damages of vast sums, potentially billions.

These sums are based not on real financial harm but money the tribunal officials determine the company would perhaps have made. The state could be forced to drop the legislation. It will be deterred from enacting future policies of a similar nature, for fear of being sued.

A Process Growing Exponentially

Record numbers of cases are being initiated, as corporations learn from each other, and private equity finance suits for a share of a cut of the settlements. The result? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the rulings taken by legislatures is that this provision has been written – absent public approval, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the high court. The presiding officer determined that schemes to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on national carbon targets. The new government then withdrew the licence the Tories had granted. Today, this victory is under threat by an foreign court reporting to only the entities bringing the case.

In August, a firm whose beneficial owners are located in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the US capital was established to hear it.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to commence operations. Citizens have little idea how much this could amount to. What legal team is representing it challenging the UK administration? An elected representative, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official represents its behalf.

The Russian Lawsuit

On the same day that the panel on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case to date, but it seems likely that he will utilise the ISDS mechanism to challenge the sanctions the UK imposed on him subsequent to the Russian aggression. He has previously initiated proceedings against Luxembourg for this reason, demanding $16bn: equivalent to half of nation's yearly income. Included in the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s hesitation in leveraging immobilised state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states could be blocking the finance Ukraine urgently requires.

Empty Promises and Escalating Risks

Politicians promised that these scenarios could not occur. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this matter labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries had to worry about ISDS claims. Warnings that “as corporations grasp the authority they now possess, they will shift their focus from the weak nations to the developed economies” were dismissed with general mockery.

That warning has come to pass. Recently, fossil fuel and mining firms have filed a unprecedented number of claims against nations rich and poor, opposing – like the example of the Whitehaven project – official measures to prevent climate breakdown. Companies have so far won $114bn via ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP