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Can you understand our democratic process works? Maybe along the lines of this. We elect MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation is upheld by the courts. That's it. Yet, that was how it used to work. Not anymore.

The Emergence of Shadow Courts

Today, foreign corporations, or the billionaires who own them, have the power to sue governments for the regulations they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even enterprises based in this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These awards represent not real financial harm but compensation the arbitrators conclude the company could potentially have made. The state could be forced to abandon its policy. It becomes discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of disputes are being initiated, as corporations learn from each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The result? National sovereignty and democratic governance are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the rulings taken by elected bodies is that this stipulation has been inserted – without democratic mandate, and often in a climate of extreme secrecy – within international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer determined that plans to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have had no impact on our carbon budgets. The new government then withdrew the licence the previous administration had issued. Now, this legal outcome could be compromised by an secret arbitration panel reporting to only the companies bringing the case.

In August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in Washington DC was convened to hear it.

The claimant is suing the UK for the revenue it would have generated if the mine had been allowed to commence operations. Citizens have no idea how much this might be. Which individual is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, that great patriot the MP. The administration enacts a policy, the domestic court supports it, then a overseas corporation contests it through an undemocratic private court, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he will utilise the tribunal to fight the penalties the UK levied against him after the Russian aggression. He has already started suing Luxembourg on these grounds, seeking a colossal sum: an amount representing half nation's annual revenue. Included in the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s delay in using frozen state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

Empty Promises and Escalating Risks

Politicians promised that these events could not occur. Previously, a government leader, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” A consultant on this topic accused activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “once firms begin to understand the power they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning has come to pass. This year, energy and mining firms have filed a historic level of claims against nations rich and poor, challenging – as in the case of the UK mine – government attempts to prevent environmental catastrophe. Firms have so far won $114bn by using ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP