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How do you understand our democratic process operates? Maybe similar to this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Legislation is maintained by the courts. That's it. Well, that used to be how it used to work. Not anymore.

The Emergence of Shadow Courts

Nowadays, international firms, along with the billionaires who own them, are able to litigate against nation states for the laws they pass, at private courts composed of corporate lawyers. The cases are held in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even companies based in this country. They are open exclusively to businesses based overseas.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it can award damages of hundreds of millions of pounds, potentially billions.

These awards represent not tangible damages but funds the panel members decide the company could potentially have made. The state might be compelled to abandon its policy. It becomes deterred from enacting future policies along the same lines, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being brought, as companies learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The result? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the choices enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under a climate of profound opacity – inside international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the senior court. The justice determined that plans to open the first new deep coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine could have no consequence on national carbon targets. The Labour government subsequently revoked the licence the former government had granted. Now, this success could be compromised by an secret arbitration panel reporting to exclusively the entities bringing the case.

In August, a firm whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was convened to consider the case.

This firm is litigating against the UK for the revenue it could have earned if the mine had been permitted to go ahead. The public has no idea how much this could amount to. Who is representing it against the British government? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a overseas corporation contests it through an secretive offshore tribunal, and a elected official works for its behalf.

An Oligarch's Case

Simultaneously that the court on the coalmine case was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it appears probable that he’ll use the tribunal to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already started suing a small nation for this reason, demanding sixteen billion dollars: equivalent to half of state's yearly budget. Among the legal team representing him there? a prominent lawyer, wife of the previous PM.

International law scholars argue that the EU’s hesitation in leveraging immobilised Russian assets as security for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

Misleading Claims and Growing Threats

Politicians promised that such things wouldn’t happen. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this topic accused campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by ISDS claims. Predictions that “when companies grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were met with general mockery.

That warning has come to pass. This year, fossil fuel and mining firms have initiated a unprecedented number of cases against nations rich and poor, contesting – similar to the UK mine – government attempts to prevent global warming. Firms have to date won $114bn via ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP