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What is your perceive our democratic process functions? Perhaps something like this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. Yet, that’s how it once functioned. No longer.

The Advent of Shadow Courts

In the modern era, foreign corporations, and the billionaires behind them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of commercial attorneys. These proceedings take place in secret. In contrast to domestic courts, these panels grant no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, or even companies operating from this country. They are open exclusively to businesses based overseas.

Should an arbitration panel determines that a law or policy may compromise the corporation’s projected profits, it may order damages of hundreds of millions, potentially billions.

These awards represent not real financial harm but compensation the panel members conclude the company could potentially have made. The state may have to drop the legislation. It will be deterred from enacting future policies along the same lines, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of cases are being initiated, as companies take cues from each other, and private equity bankroll lawsuits in return for a cut of the takings. The result? Sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and often in conditions of profound opacity – within bilateral investment treaties.

A Real-World Example: The Whitehaven Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The justice ruled that plans to dig the first major coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the previous government, which had agreed to the questionable argument that the mine would have no consequence on climate commitments. The Labour government subsequently revoked the consent the Tories had granted. Today, this legal outcome is under threat by an offshore tribunal accountable to no one but the corporations filing the suit.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands lodged a claim against the UK government. Last week a tribunal in the US capital was established to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. Which individual is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The state passes a law, the high court supports it, then a overseas corporation contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK imposed on him after the Russian aggression. He has filed a claim against a small nation on these grounds, demanding $16bn: half that nation's yearly budget. Part of the legal team acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts believe that the EU’s delay in leveraging immobilised oligarchs' funds as security for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Growing Threats

We were assured that these scenarios wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this matter described activists of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “once firms start to realise the power they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction is now a reality. This year, energy and extraction companies have lodged a record number of claims against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have so far won vast sums by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP