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What is your perceive our democratic process functions? Perhaps something like this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. The law is maintained by the courts. End of story. Yet, that’s how it used to work. Not anymore.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the oligarchs who own them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by business advocates. These proceedings take place behind closed doors. In contrast to domestic courts, these tribunals provide no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even companies based in this country. The door is open solely for entities registered abroad.

When a secret court rules that a law or policy could harm the corporation’s anticipated profits, it can award damages of hundreds of millions, potentially billions.

These awards represent not tangible damages but compensation the arbitrators determine the company might otherwise have made. The government could be forced to abandon its policy. It is hesitant to introducing similar legislation of a similar nature, for fear of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations learn from each other, and private equity bankroll lawsuits in exchange for a share of the takings. The outcome? National sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices made by elected bodies is that this clause has been written – absent public approval, and often in an atmosphere of total confidentiality – within bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the high court. The judge determined that plans to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The incoming administration later cancelled the consent the former government had approved. Currently, this legal outcome faces being overturned by an secret arbitration panel accountable to only the companies petitioning it.

Last August, a corporate entity whose final controllers are located in the Cayman Islands lodged a claim challenging the UK government. Recently a arbitration panel in the United States was set up to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had received permission to proceed. We have little idea how much this might be. What legal team is acting on its behalf against the British government? A member of parliament, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a overseas corporation contests it through an unaccountable private court, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coal mine dispute was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case to date, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against another European state for this reason, claiming sixteen billion dollars: equivalent to half of state's yearly income. Included in the legal team on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts believe that the EU’s hesitation in using frozen oligarchs' funds as security for its loan to Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over democratic administrations could be blocking the funds Ukraine critically depends on.

Misleading Claims and Growing Risks

The public was told that such things were not possible. Previously, a government leader, championing the largest and riskiest of all such treaties, stated: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this topic accused activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Predictions that “when companies start to realise the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That warning has come to pass. In the current period, fossil fuel and resource corporations have filed a historic level of claims against nations both wealthy and developing, opposing – like the example of the UK mine – state efforts to halt environmental catastrophe. Firms have to date won $114bn via ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP