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Can you reckon our democratic process works? It could be similar to this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. End of story. Well, that’s how it used to work. Not anymore.

The Emergence of Shadow Courts

Nowadays, foreign corporations, and the billionaires that control them, have the power to sue elected administrations for the regulations they pass, at private courts made up of business advocates. These proceedings take place behind closed doors. Unlike our courts, these bodies allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel finds that a government measure could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, even billions.

These sums represent not actual losses but compensation the arbitrators determine the company could potentially have made. The government could be forced to abandon its policy. It is hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Historically high figures of disputes are being brought, as corporations learn from each other, and private equity finance suits for a share of a share of the settlements. The result? Democratic sovereignty and democracy are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the decisions taken by parliaments is that this clause has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – inside bilateral investment treaties.

A Specific Example: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the high court. The judge determined that proposals to open the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have no consequence on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had granted. Now, this victory could be compromised by an foreign court reporting to only the entities bringing the case.

During August, a firm whose ultimate owners reside in the tax haven filed a lawsuit against the UK government. Recently a tribunal in the US capital was established to consider the case.

The company is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. Citizens have no clear indication how much this might be. Which individual is serving as its counsel against the British government? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The state enacts a policy, the high court upholds it, then a foreign company challenges it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case so far, but it is highly possible that he may employ the tribunal to fight the restrictions the UK levied against him following the invasion of Ukraine. He has filed a claim against another European state with similar intent, seeking $16bn: half that government’s annual revenue. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen state funds as collateral for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over democratic administrations could be blocking the money Ukraine critically depends on.

Misleading Claims and Mounting Costs

We were assured that these scenarios were not possible. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” An expert on this issue described critics of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations had to worry about such legal actions. Cautionary notes that “once firms grasp the power they now possess, they will redirect their efforts from the poorer states to the developed economies” were met with general mockery.

That threat is now a reality. Recently, fossil fuel and resource corporations have filed a record number of cases against nations rich and poor, contesting – like the example of the Cumbrian coalmine – government attempts to stop global warming. Corporations have so far won vast sums by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP