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Can you reckon our democratic process functions? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that’s how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, and the billionaires that control them, have the power to sue elected administrations for the laws they pass, at private courts composed of corporate lawyers. The cases are held in secret. In contrast to domestic courts, these panels grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even businesses operating from this country. The door is open exclusively to businesses operating from foreign soil.

If a tribunal finds that a government measure might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These awards represent not real financial harm but compensation the panel members decide the company could potentially have made. The government might be compelled to abandon its policy. It will be hesitant to enacting future policies in that area, due to the risk of being sued.

A Process Growing Exponentially

Record numbers of disputes are being initiated, as firms learn from each other, and hedge funds finance suits in exchange for a cut of the takings. The outcome? Sovereignty and democracy are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the decisions enacted by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the senior court. The judge determined that schemes to dig the first new deep coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have no consequence on climate commitments. The incoming administration later cancelled the licence the former government had granted. Today, this success could be compromised by an offshore tribunal accountable to no one but the entities bringing the case.

Last August, a firm whose beneficial owners reside in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the United States was convened to consider the case.

The company is suing the UK for the profits it might have made if the mine had been allowed to go ahead. Citizens have no idea how much this might be. What legal team is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a overseas corporation disputes it through an secretive private court, and a elected official represents its behalf.

A Sanctions Case

Concurrently that the court on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case so far, but it seems likely that he will utilise the ISDS mechanism to challenge the penalties the UK imposed on him following the Russian aggression. He has previously started suing Luxembourg with similar intent, claiming a colossal sum: equivalent to half of government’s yearly income. Among the counsel representing him there? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine critically depends on.

Empty Promises and Growing Costs

Politicians promised that such things could not occur. In 2014, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “Britain has agreed to investment treaty upon trade deal and we have never seen a case in the past.” An expert on this matter accused activists of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “as corporations begin to understand the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That prediction has come to pass. In the current period, fossil fuel and mining firms have lodged a record number of claims against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Firms have thus far won $114bn through ISDS, of which oil majors have obtained $84bn. That represents the combined GDP