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What is your understand our democratic process operates? It could be similar to this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that was how it operated in the past. Those days are over.

The Advent of Shadow Tribunals

Today, overseas companies, or the billionaires who own them, are able to litigate against governments for the policies they pass, at private courts made up of business advocates. These proceedings are held behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even companies based in this country. They are open exclusively to corporations operating from foreign soil.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, even billions.

These awards constitute not real financial harm but funds the panel members determine the company could potentially have made. The government might be compelled to drop the legislation. It becomes discouraged from passing future laws in that area, worried about being sued.

A Mechanism Running Rampant

Historically high figures of disputes are being brought, as firms observe each other, and private equity finance suits in return for a share of the awards. The result? Democratic sovereignty and democratic governance are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the choices taken by parliaments is that this clause has been incorporated – absent public approval, and typically amid a climate of profound opacity – inside international trade agreements.

A Specific Case: The Cumbrian Coalmine

Last year, activists won a great victory at the high court. The presiding officer determined that schemes to dig the first major coal mine in the UK for three decades, in northwest England, were wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine could have no impact on our carbon budgets. The incoming administration later cancelled the licence the previous administration had approved. Currently, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the companies filing the suit.

Last August, a company whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the United States was convened to consider the case.

This firm is suing the UK for the revenue it might have made if the mine had been permitted to commence operations. The public has no clear indication how much this might be. Who is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The administration passes a law, the domestic court supports it, then a international entity disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

The Russian Case

On the same day that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case at present, but it seems likely that he’ll use the ISDS mechanism to contest the penalties the UK levied against him after the war in Ukraine. He has filed a claim against a small nation on these grounds, demanding a colossal sum: an amount representing half nation's yearly budget. Included in the lawyers on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen Russian assets as collateral for its financial support package arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over sovereign states could be blocking the money Ukraine critically depends on.

Empty Promises and Growing Costs

Politicians promised that these events wouldn’t happen. Previously, a senior politician, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An adviser on this issue labelled campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries needed to fear ISDS claims. Warnings that “once firms start to realise the authority they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were met with general mockery.

That threat has come to pass. This year, oil and gas and extraction companies have initiated a historic level of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – official measures to prevent global warming. Firms have so far won vast sums through ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP