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How do you understand our democratic process functions? Perhaps something like this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. The law is maintained by the courts. That's it. Well, that was how it once functioned. Not anymore.

The Emergence of Shadow Courts

In the modern era, foreign corporations, along with the billionaires who own them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are conducted behind closed doors. Differing from national judiciaries, these bodies grant no right of appeal or legal review. You or I are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for entities registered abroad.

Should an arbitration panel finds that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but money the panel members decide the company could potentially have made. The administration might be compelled to abandon its policy. It will be hesitant to enacting future policies of a similar nature, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of disputes are being brought, as corporations take cues from each other, and hedge funds bankroll lawsuits in return for a portion of the settlements. The consequence? Sovereignty and popular rule are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions taken by parliaments is that this stipulation has been written – without democratic mandate, and often in conditions of profound opacity – into bilateral investment treaties.

A Concrete Instance: The UK Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer found that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine could have zero effect on national carbon targets. The incoming administration later cancelled the consent the Tories had approved. Currently, this legal outcome faces being overturned by an offshore tribunal reporting to exclusively the corporations bringing the case.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. Last week a arbitration panel in the US capital was established to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has no idea how much this could amount to. What legal team is acting on its behalf challenging the UK administration? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the domestic court upholds it, then a international entity contests it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Concurrently that the panel on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case to date, but it is highly possible that he will utilise the tribunal to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, demanding sixteen billion dollars: an amount representing half state's yearly income. Part of the lawyers on his side? a prominent lawyer, married to the previous PM.

Legal experts contend that the EU’s delay in utilising seized Russian assets as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the money Ukraine desperately needs.

Empty Promises and Mounting Costs

Politicians promised that these scenarios wouldn’t happen. In 2014, a former prime minister, promoting the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade deal upon trade deal and there has never been a issue in the past.” A consultant on this issue accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries had to worry about ISDS claims. Predictions that “when companies start to realise the authority they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That prediction is now a reality. This year, energy and extraction companies have filed a historic level of cases against nations rich and poor, opposing – similar to the Whitehaven project – state efforts to prevent climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP