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Can you understand our democratic process operates? It could be something like this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills become law. The law is upheld by the courts. Simple as that. Well, that’s how it once functioned. Those days are over.

The Rise of Shadow Tribunals

In the modern era, foreign corporations, or the wealthy individuals that control them, can sue nation states for the policies they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, including enterprises operating from this country. The door is open only to businesses based overseas.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, even billions.

This compensation constitute not real financial harm but compensation the tribunal officials determine the company would perhaps have made. The government could be forced to drop the legislation. It will be discouraged from introducing similar legislation in that area, for fear of being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms learn from each other, and private equity bankroll lawsuits in exchange for a cut of the settlements. The result? Democratic sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the decisions made by parliaments is that this clause has been written – without public consent, and frequently under conditions of profound opacity – inside international trade agreements.

A Specific Example: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the senior court. The presiding officer found that schemes to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration subsequently revoked the permission the previous administration had issued. Now, this victory is under threat by an secret arbitration panel answering to no one but the companies petitioning it.

In August, a firm whose final controllers are based in the tax haven lodged a claim against the UK government. Last week a dispute settlement body in Washington DC was established to hear it.

This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. The public has little idea how much this could amount to. Which individual is serving as its counsel in opposition to the British government? An elected representative, and ex-law officer in the Conservative government, that great patriot the MP. The government enacts a policy, the high court upholds it, then a international entity disputes it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case to date, but it appears probable that he’ll use the arbitration process to contest the sanctions the UK levied against him subsequent to the Russian aggression. He has already filed a claim against Luxembourg for this reason, claiming $16bn: an amount representing half state's yearly budget. Among the counsel representing him there? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s delay in utilising seized Russian assets as guarantee for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

Misleading Claims and Mounting Costs

Politicians promised that such things could not occur. Years ago, a senior politician, championing the largest and riskiest of all such treaties, told us: “The UK has signed trade deal upon trade deal and there has not been a issue in the past.” An adviser on this topic accused activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear ISDS claims. Warnings that “when companies start to realise the power they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That warning has now materialised. This year, oil and gas and resource corporations have filed a record number of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – government attempts to prevent global warming. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured the majority. That equates to the combined GDP