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How do you perceive our democratic process operates? Maybe similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Emergence of Shadow Arbitration Panels

In the modern era, international firms, and the billionaires that control them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels made up of business advocates. Such disputes are held behind closed doors. In contrast to domestic courts, these bodies provide no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, or even businesses headquartered in this country. They are open solely for entities based overseas.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

These sums constitute not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The government might be compelled to abandon its policy. It becomes deterred from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of cases are being initiated, as companies learn from each other, and investment funds finance suits in exchange for a portion of the settlements. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings taken by elected bodies is that this clause has been inserted – without democratic mandate, and often in an atmosphere of profound opacity – into international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge found that schemes to dig the first major coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine could have no impact on climate commitments. The new government subsequently revoked the consent the former government had approved. Currently, this victory faces being overturned by an offshore tribunal accountable to only the companies filing the suit.

In August, a company whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in the US capital was convened to consider the case.

This firm is seeking compensation from the UK for the money it might have made if the mine had been permitted to commence operations. The public has no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a foreign company challenges it through an unaccountable private court, and a member of our parliament acts on its behalf.

A Sanctions Case

On the same day that the court on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case to date, but it appears probable that he’ll use the tribunal to challenge the penalties the UK levied against him after the war in Ukraine. He has already filed a claim against a small nation for this reason, demanding $16bn: an amount representing half state's yearly income. Included in the legal team representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over sovereign states may be obstructing the finance Ukraine desperately needs.

False Assurances and Mounting Risks

The public was told that such things were not possible. Previously, a former prime minister, promoting the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” A consultant on this issue labelled critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “as corporations grasp the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. Recently, fossil fuel and resource corporations have filed a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – state efforts to stop global warming. Firms have thus far won $114bn through ISDS, of which energy giants have secured the majority. That equates to the combined GDP