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What is your understand our democratic process operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Advent of Shadow Courts

In the modern era, international firms, or the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at private courts composed of commercial attorneys. These proceedings are conducted in secret. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, including businesses operating from this country. Access is granted only to entities registered abroad.

Should an arbitration panel rules that a government measure might diminish the corporation’s expected profits, it may order compensation of vast sums, potentially billions.

These awards constitute not real financial harm but money the panel members conclude the company could potentially have made. The government may have to drop the legislation. It becomes hesitant to introducing similar legislation along the same lines, for fear of being sued.

A Process Growing Exponentially

Unprecedented levels of cases are being brought, as firms learn from each other, and private equity finance suits in return for a portion of the awards. The result? National sovereignty and popular rule are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the decisions taken by elected bodies is that this provision has been written – absent public approval, and often in an atmosphere of profound opacity – inside international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

Last year, activists won a great victory at the High Court. The judge found that schemes to open the first major coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the consent the former government had issued. Currently, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the entities bringing the case.

In August, a company whose beneficial owners are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a tribunal in the United States was set up to consider the case.

The claimant is suing the UK for the profits it might have made if the mine had been permitted to commence operations. Citizens have no clear indication how much this could amount to. What legal team is acting on its behalf in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

The Russian Case

Simultaneously that the court on the mining lawsuit was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case at present, but it appears probable that he will utilise the tribunal to contest the penalties the UK imposed on him after the Russian aggression. He has already started suing Luxembourg with similar intent, claiming $16bn: an amount representing half government’s yearly income. Among the legal team representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that these events could not occur. Previously, a government leader, championing the biggest and most dangerous of all these agreements, stated: “The UK has signed trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this topic labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries had to worry about ISDS claims. Predictions that “once firms begin to understand the authority they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That threat is now a reality. In the current period, oil and gas and extraction companies have filed a historic level of suits against nations both wealthy and developing, challenging – like the example of the Whitehaven project – government attempts to halt environmental catastrophe. Companies have thus far won $114bn through ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP