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How do you understand our democratic process operates? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Legislation are enforced by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Emergence of Shadow Courts

Today, overseas companies, and the wealthy individuals behind them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals made up of commercial attorneys. These proceedings take place away from public scrutiny. Differing from national judiciaries, these bodies grant no right of appeal or judicial review. You or I cannot take a case to them, nor can our government, including enterprises based in this country. The door is open only to businesses operating from foreign soil.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

This compensation constitute not actual losses but funds the panel members conclude the company would perhaps have made. The administration could be forced to rescind the measure. It will be discouraged from introducing similar legislation in that area, worried about incurring a lawsuit.

A System Running Rampant

Record numbers of legal actions are being brought, as firms observe each other, and investment funds fund legal actions for a share of a portion of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the rulings made by legislatures is that this clause has been written – absent public approval, and often in an atmosphere of profound opacity – inside trade treaties.

A Specific Case: The UK Coalmine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer ruled that schemes to dig the first major coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The Labour government later cancelled the permission the former government had approved. Today, this victory could be compromised by an secret arbitration panel reporting to exclusively the corporations filing the suit.

During August, a corporate entity whose final controllers are located in the offshore financial centre filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was convened to consider the case.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to proceed. Citizens have little idea how much this might be. Which individual is serving as its counsel in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a international entity challenges it through an undemocratic arbitration panel, and a elected official acts on its behalf.

An Oligarch's Case

Concurrently that the court on the mining lawsuit was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case so far, but it appears probable that he will utilise the tribunal to contest the sanctions the UK levied against him following the Russian aggression. He has already started suing another European state with similar intent, demanding sixteen billion dollars: half that government’s yearly budget. Included in the legal team on his side? Cherie Blair, wife of the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized state funds as guarantee for its financial support package is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over elected governments may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Costs

We were assured that these scenarios were not possible. Years ago, a government leader, championing the most significant and hazardous of all these agreements, stated: “The UK has signed trade agreement upon trade deal and there has not been a case in the past.” A consultant on this matter accused activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states needed to fear ISDS claims. Warnings that “once firms grasp the power they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were greeted by scepticism.

That warning has come to pass. In the current period, energy and resource corporations have initiated a historic level of claims against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – official measures to stop global warming. Companies have to date won vast sums through ISDS, of which energy giants have secured the majority. That represents the combined GDP