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How do you understand our democratic process operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. End of story. Well, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the wealthy individuals behind them, are able to litigate against elected administrations for the regulations they pass, at private courts staffed by corporate lawyers. The cases take place in secret. Unlike our courts, these bodies grant no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, including companies based in this country. The door is open exclusively to corporations registered abroad.

When a secret court determines that a law or policy may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation represent not tangible damages but money the tribunal officials decide the company might otherwise have made. The administration might be compelled to drop the legislation. It becomes deterred from enacting future policies of a similar nature, worried about incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of disputes are being filed, as corporations observe each other, and investment funds fund legal actions for a share of a share of the awards. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the rulings made by legislatures is that this stipulation has been incorporated – without public consent, and often in an atmosphere of profound opacity – inside trade treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, activists secured a significant win at the senior court. The presiding officer ruled that plans to open the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on climate commitments. The new government subsequently revoked the consent the previous administration had granted. Currently, this success is under threat by an offshore tribunal accountable to only the entities petitioning it.

Last August, a firm whose beneficial owners are based in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in the United States was convened to consider the case.

The company is suing the UK for the money it would have generated if the mine had been allowed to go ahead. We have little idea how much this sum represents. What legal team is representing it against the state? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the high court upholds it, then a overseas corporation contests it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Challenge

On the same day that the court on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case so far, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has already started suing a small nation with similar intent, demanding $16bn: an amount representing half nation's yearly income. Among the lawyers on his side? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s hesitation in leveraging immobilised oligarchs' 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 investment pact. This remarkable, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Costs

Politicians promised that such things could not occur. In 2014, a government leader, advocating for the largest and riskiest of all these agreements, told us: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An adviser on this matter accused campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear such legal actions. Predictions that “when companies start to realise the authority they’ve been granted, they will shift their focus from the weak nations to the strong ones” were met with widespread derision.

That threat has now materialised. Recently, oil and gas and mining firms have initiated a historic level of cases against nations across the economic spectrum, opposing – similar to the Whitehaven project – state efforts to halt global warming. Corporations have so far won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP