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Can you understand our democratic process works? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that used to be how it used to work. Not anymore.

The Rise of Shadow Courts

Today, overseas companies, along with the wealthy individuals that control them, can sue elected administrations for the policies they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these panels allow no right of appeal or legal review. You or I are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. Access is granted only to corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant compensation of vast sums, running into billions.

These sums constitute not actual losses but money the arbitrators conclude the company might otherwise have made. The state could be forced to abandon its policy. It is hesitant to enacting future policies along the same lines, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as companies observe each other, and private equity bankroll lawsuits for a share of a portion of the awards. The outcome? Sovereignty and popular rule are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the decisions made by parliaments is that this clause has been written – without democratic mandate, and frequently under an atmosphere of extreme secrecy – within bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The justice determined that plans to excavate the first new deep coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had no impact on climate commitments. The incoming administration later cancelled the consent the former government had granted. Now, this success could be compromised by an secret arbitration panel answering to no one but the corporations petitioning it.

Last August, a firm whose beneficial owners are located in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in the United States was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it might have made if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. Who is acting on its behalf in opposition to the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the domestic court supports it, then a foreign company disputes it through an undemocratic private court, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case to date, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK levied against him after the Russian aggression. He has filed a claim against another European state for this reason, claiming a colossal sum: an amount representing half government’s yearly budget. Among the legal team on his side? a prominent lawyer, married to the previous PM.

International law scholars argue that the EU’s hesitation in utilising seized Russian assets as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Risks

The public was told that these scenarios were not possible. Years ago, a senior politician, championing the largest and riskiest of all such treaties, told us: “We’ve signed trade deal after trade deal and there has not been a case in the past.” An adviser on this matter labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear such legal actions. Cautionary notes that “once firms start to realise the influence they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with general mockery.

That threat has come to pass. This year, energy and mining firms have filed a unprecedented number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – government attempts to stop global warming. Firms have to date won $114bn by using ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP