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What is your understand our democratic process operates? Maybe along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. The law is maintained by the courts. Simple as that. Well, that was how it once functioned. No longer.

The Rise of Shadow Tribunals

Nowadays, international firms, or the billionaires who own them, have the power to sue governments for the laws they pass, at offshore tribunals composed of commercial attorneys. These proceedings take place away from public scrutiny. In contrast to domestic courts, these panels allow no avenue for appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including businesses based in this country. Access is granted exclusively to corporations based overseas.

Should an arbitration panel rules that a government measure might diminish the corporation’s anticipated profits, it may order financial penalties of vast sums, even billions.

These sums represent not actual losses but compensation the panel members decide the company could potentially have made. The state may have to rescind the measure. It becomes deterred from passing future laws of a similar nature, for fear of being sued.

A Process Growing Exponentially

Historically high figures of cases are being brought, as corporations take cues from each other, and private equity finance suits in exchange for a share of the settlements. The result? Sovereignty and democracy are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the choices enacted by legislatures is that this clause has been written – without democratic mandate, and typically amid a climate of profound opacity – into trade treaties.

A Real-World Example: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the High Court. The presiding officer found that schemes to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine could have no consequence on climate commitments. The Labour government later cancelled the licence the Tories had issued. Today, this victory could be compromised by an offshore tribunal reporting to no one but the companies filing the suit.

Last August, a corporate entity whose final controllers are located in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was established to consider the case.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to go ahead. Citizens have little 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, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official works for its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coal mine dispute was established, 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 scarce of the case to date, but it seems likely that he may employ the tribunal to fight the sanctions the UK levied against him subsequent to the Russian aggression. He has already initiated proceedings against another European state with similar intent, demanding sixteen billion dollars: an amount representing half state's yearly budget. Among the legal team acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over sovereign states could be blocking the finance Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that these scenarios were not possible. Years ago, a senior politician, advocating for the most significant and hazardous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” An expert on this matter described critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms grasp the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction has come to pass. Recently, energy and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to stop climate breakdown. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP