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What is your reckon our democratic process operates? It could be similar to this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills pass into law. Legislation is maintained by the courts. That's it. However, that’s how it once functioned. Not anymore.

The Rise of Shadow Tribunals

Nowadays, international firms, and the billionaires who own them, can sue nation states for the regulations they pass, at private courts made up of commercial attorneys. Such disputes are held in secret. In contrast to domestic courts, these panels provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. The door is open only to businesses operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, potentially billions.

This compensation constitute not tangible damages but compensation the panel members decide the company might otherwise have made. The government may have to drop the legislation. It will be hesitant to passing future laws in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as firms take cues from each other, and private equity bankroll lawsuits in exchange for a cut of the awards. The consequence? Sovereignty and democratic governance are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the decisions enacted by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of total confidentiality – into international trade agreements.

A Specific Case: The UK Coalmine

Twelve months ago, activists won a great victory at the High Court. The presiding officer found that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the permission the Tories had approved. Currently, this success faces being overturned by an secret arbitration panel answering to only the corporations petitioning it.

Last August, a firm whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. Last week a tribunal in the US capital was convened to hear it.

This firm is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no idea how much this could amount to. Which individual is representing it against the state? An elected representative, and former attorney-general in the Conservative 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 secretive private court, and a elected official represents its behalf.

The Russian Lawsuit

On the same day that the tribunal on the mining lawsuit was established, it was revealed 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 so far, but it appears probable that he will utilise the ISDS mechanism to fight the penalties the UK levied against him following the Russian aggression. He has already started suing Luxembourg with similar intent, claiming $16bn: half that government’s yearly income. Among the legal team representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s delay in leveraging immobilised Russian assets as collateral for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over elected governments could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

Politicians promised that these events could not occur. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this matter described critics of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. 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 greeted by widespread derision.

That threat has come to pass. Recently, oil and gas and extraction companies have filed a unprecedented number of cases against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP