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What is your perceive our democratic process operates? Maybe something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes are enforced by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, or the wealthy individuals that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of commercial attorneys. The cases are conducted behind closed doors. Unlike our courts, these tribunals provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even companies operating from this country. The door is open exclusively to corporations operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards represent not real financial harm but funds the arbitrators determine the company might otherwise have made. The administration might be compelled to rescind the measure. It becomes deterred from introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The consequence? National sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices enacted by elected bodies is that this clause has been incorporated – absent public approval, and typically amid conditions of total confidentiality – inside trade treaties.

A Real-World Instance: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer found that schemes to dig the first major coal mine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have no consequence on our carbon budgets. The Labour government later cancelled the consent the former government had issued. Now, this victory is under threat by an offshore tribunal reporting to exclusively the companies bringing the case.

In August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in the US capital was convened to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. Citizens have no clear indication how much this might be. Who is serving as its counsel in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court validates it, then a foreign company disputes it through an undemocratic private court, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coal mine dispute was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he may employ the tribunal to challenge the penalties the UK levied against him subsequent to the Russian aggression. He has started suing a small nation for this reason, seeking $16bn: an amount representing half government’s annual revenue. Included in the counsel representing him there? Cherie Blair, wife of the ex-UK leader.

Trade specialists argue that the EU’s delay in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations might be preventing the money Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that these events could not occur. In 2014, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this topic described campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. Recently, fossil fuel and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, contesting – similar to the Whitehaven project – state efforts to prevent environmental catastrophe. Firms have thus far won $114bn via ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP