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How do you understand our democratic process works? It could be something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation is maintained by the courts. That's it. Well, that was how it used to work. No longer.

The Advent of Shadow Courts

Nowadays, international firms, along with the oligarchs that control them, are able to litigate against nation states for the regulations they pass, at private courts composed of business advocates. The cases are held away from public scrutiny. Unlike our courts, these bodies provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies headquartered in this country. The door is open solely for corporations operating from foreign soil.

When a secret court finds that a government measure may compromise the corporation’s projected profits, it has the power to grant compensation of vast sums, even billions.

These awards constitute not actual losses but compensation the arbitrators decide the company would perhaps have made. The administration may have to drop the legislation. It is discouraged from introducing similar legislation along the same lines, worried about facing litigation.

A System Running Rampant

Record numbers of cases are being filed, as companies observe each other, and private equity finance suits for a share of a cut of the settlements. The outcome? National sovereignty and democracy are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the decisions taken by legislatures is that this clause has been written – without public consent, and frequently under a climate of profound opacity – inside international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the high court. The judge determined that proposals to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The new government then withdrew the consent the former government had granted. Today, this legal outcome is under threat by an foreign court answering to only the entities petitioning it.

In August, a company whose ultimate owners are based in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was convened to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had been allowed to proceed. The public has no clear indication how much this might be. What legal team is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a international entity contests it through an undemocratic offshore tribunal, and a elected official represents its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case to date, but it is highly possible that he may employ the ISDS mechanism to contest the sanctions the UK imposed on him following the war in Ukraine. He has initiated proceedings against a small nation for this reason, seeking sixteen billion dollars: equivalent to half of nation's yearly budget. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine critically depends on.

Empty Promises and Growing Threats

The public was told that such things wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An adviser on this issue accused critics 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 “once firms begin to understand the influence they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were dismissed with scepticism.

That prediction has come to pass. This year, fossil fuel and extraction companies have initiated a unprecedented number of claims against nations rich and poor, opposing – similar to the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have so far won $114bn by using ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP