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How do you perceive our democratic process functions? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that was how it once functioned. Those days are over.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the oligarchs who own them, are able to litigate against governments for the policies they pass, at private courts composed of commercial attorneys. The cases take place in secret. Unlike our courts, these panels provide no opportunity to appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, including businesses headquartered in this country. The door is open solely for entities registered abroad.

When a secret court rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

These awards constitute not actual losses but compensation the panel members determine the company could potentially have made. The administration may have to rescind the measure. It is hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of disputes are being initiated, as companies take cues from each other, and private equity fund legal actions for a share of a cut of the awards. The outcome? National sovereignty and democracy are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the decisions taken by elected bodies is that this stipulation has been inserted – without public consent, and often in conditions of profound opacity – within international trade agreements.

A Specific Case: The Cumbrian Coalmine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge determined that schemes to excavate the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have zero effect on national carbon targets. The Labour government subsequently revoked the licence the former government had granted. Now, this success could be compromised by an secret arbitration panel accountable to only the companies filing the suit.

Last August, a firm whose beneficial owners reside in the offshore financial centre filed a lawsuit versus the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is seeking compensation from the UK for the money it could have earned if the mine had been allowed to proceed. The public has no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government makes a decision, the high court validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Challenge

On the same day that the panel on the coalmine case was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know little of the case at present, but it appears probable that he will utilise the arbitration process to fight the sanctions the UK imposed on him after the Russian aggression. He has previously filed a claim against a small nation with similar intent, demanding $16bn: an amount representing half state's annual revenue. Included in the lawyers acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s hesitation in leveraging immobilised state funds as collateral for its financial support package stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over democratic administrations might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Costs

We were assured that such things wouldn’t happen. In 2014, a government leader, advocating for the largest and riskiest of all these agreements, told us: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this matter accused critics of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear ISDS claims. Warnings that “when companies grasp the influence bestowed upon them, they will shift their focus from the poorer states to the strong ones” were met with widespread derision.

That warning has now materialised. In the current period, energy and mining firms have lodged a historic level of claims against nations across the economic spectrum, opposing – as in the case of the UK mine – official measures to halt climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP