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What is your reckon our democratic process works? Maybe along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. Statutes are enforced by the courts. End of story. Yet, that used to be how it used to work. Those days are over.

The Rise of Shadow Courts

Today, international firms, and the oligarchs behind them, can sue elected administrations for the policies they pass, at private courts composed of corporate lawyers. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these panels grant no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses based in this country. They are open exclusively to businesses based overseas.

Should an arbitration panel rules that a government measure could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, potentially billions.

These sums constitute not actual losses but compensation the panel members determine the company might otherwise have made. The state could be forced to rescind the measure. It is discouraged from enacting future policies along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being filed, as firms observe each other, and hedge funds finance suits in exchange for a share of the awards. The result? Democratic sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the decisions enacted by legislatures is that this stipulation has been inserted – absent public approval, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Concrete Instance: The UK Coalmine

A year ago, activists achieved a major legal triumph at the high court. The justice found that plans to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have zero effect on national carbon targets. The Labour government then withdrew the consent the former government had issued. Currently, this success could be compromised by an secret arbitration panel answering to exclusively the entities bringing the case.

During August, a firm whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. Last week a arbitration panel in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had received permission to proceed. Citizens have no idea how much this sum represents. Who is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court validates it, then a foreign company challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Challenge

Simultaneously that the panel on the coalmine case was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK enacted against him following the war in Ukraine. He has previously filed a claim against another European state on these grounds, claiming a colossal sum: equivalent to half of nation's yearly income. Among the legal team acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

Politicians promised that such things wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade deal upon trade deal and we have never seen a problem in the past.” An expert on this matter described activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states needed to fear such legal actions. Predictions that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were dismissed with scepticism.

That warning has now materialised. In the current period, fossil fuel and extraction companies have filed a historic level of claims against nations rich and poor, contesting – like the example of the Whitehaven project – government attempts to prevent climate breakdown. Corporations have to date won vast sums by using ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP