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Can you understand our democratic process works? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Emergence of Shadow Courts

In the modern era, overseas companies, or the oligarchs behind them, can sue nation states for the regulations they pass, at private courts composed of commercial attorneys. The cases are conducted in secret. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. They are open exclusively to businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These awards are based not on tangible damages but funds the arbitrators determine the company could potentially have made. The administration may have to rescind the measure. It is discouraged from passing future laws along the same lines, worried about being sued.

A System Growing Exponentially

Record numbers of cases are being initiated, as corporations learn from each other, and hedge funds finance suits in return for a portion of the takings. The result? National sovereignty and popular rule are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the rulings taken by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid an atmosphere of total confidentiality – inside bilateral investment treaties.

A Real-World Case: The Whitehaven Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The justice found that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no impact on climate commitments. The new government subsequently revoked the consent the previous administration had approved. Currently, this victory is under threat by an secret arbitration panel answering to no one but the entities filing the suit.

In August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit against the UK government. Recently a dispute settlement body in Washington DC was established to consider the case.

The company is seeking compensation from the UK for the revenue it might have made if the mine had received permission to proceed. We have no idea how much this could amount to. What legal team is acting on its behalf against the British government? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary supports it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Challenge

Concurrently that the panel on the coalmine case was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case so far, but it appears probable that he will utilise the arbitration process to fight the penalties the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against another European state for this reason, demanding a colossal sum: half that state's annual revenue. Part of the lawyers acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Legal experts contend that the EU’s delay in using frozen oligarchs' funds as security for its aid for Ukraine is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that these events could not occur. Years ago, a senior politician, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this matter labelled campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations needed to fear such legal actions. Predictions that “once firms start to realise the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with general mockery.

That prediction is now a reality. Recently, fossil fuel and mining firms have filed a record number of claims against nations rich and poor, challenging – like the example of the UK mine – state efforts to prevent environmental catastrophe. Firms have to date won $114bn via ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP