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How do you understand our democratic process functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills become law. The law is upheld by the courts. That's it. Yet, that was how it used to work. No longer.

The Emergence of Shadow Tribunals

Today, overseas companies, along with the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals made up of business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, including businesses operating from this country. The door is open only to entities registered abroad.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These sums are based not on actual losses but funds the tribunal officials determine the company would perhaps have made. The state may have to rescind the measure. It will be hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being initiated, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The result? Sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings taken by legislatures is that this clause has been written – absent public approval, and often in conditions of extreme secrecy – inside international trade agreements.

A Real-World Case: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The justice ruled that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no impact on national carbon targets. The Labour government subsequently revoked the consent the previous administration had approved. Today, this legal outcome faces being overturned by an foreign court accountable to no one but the companies petitioning it.

During August, a company whose ultimate owners reside in the tax haven lodged a claim versus the UK government. The previous week a dispute settlement body in the US capital was set up to hear it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been allowed to proceed. The public has no clear indication how much this sum represents. Which individual is serving as its counsel challenging the British government? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a foreign company disputes it through an secretive arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coalmine case was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case to date, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK enacted against him following the Russian aggression. He has previously started suing a small nation with similar intent, demanding a colossal sum: equivalent to half of state's yearly budget. Included in the legal team representing him there? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Threats

We were assured that such things could not occur. Previously, a former prime minister, advocating for the most significant and hazardous of all such treaties, told us: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” An expert on this topic accused campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by ISDS claims. Warnings that “when companies grasp the authority they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were met with general mockery.

That prediction has now materialised. Recently, oil and gas and extraction companies have lodged a historic level of cases against nations rich and poor, contesting – similar to the Whitehaven project – government attempts to stop global warming. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP