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Can you understand our democratic process works? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Advent of Shadow Courts

Today, international firms, or the billionaires behind them, have the power to sue governments for the policies they pass, at private courts staffed by commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including enterprises headquartered in this country. They are open only to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These sums represent not real financial harm but compensation the tribunal officials conclude the company might otherwise have made. The administration may have to rescind the measure. It is deterred from passing future laws in that area, worried about facing litigation.

A Process Running Rampant

Record numbers of legal actions are being initiated, as companies take cues from each other, and hedge funds finance suits in exchange for a cut of the awards. The consequence? National sovereignty and popular rule are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions made by elected bodies is that this provision has been incorporated – without public consent, and frequently under conditions of extreme secrecy – within international trade agreements.

A Specific Example: The Whitehaven Coalmine

A year ago, activists secured a significant win at the High Court. The judge ruled that schemes to dig the first deep coalmine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no impact on our carbon budgets. The incoming administration later cancelled the consent the Tories had issued. Today, this legal outcome is under threat by an secret arbitration panel reporting to no one but the entities petitioning it.

Last August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the United States was established to consider the case.

The company is litigating against the UK for the profits it would have generated if the mine had been allowed to proceed. The public has no idea how much this could amount to. Which individual is serving as its counsel challenging the state? A sitting MP, and ex-law officer in the Conservative government, the noted patriot the MP. The government passes a law, the national judiciary validates it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case so far, but it is highly possible that he’ll use the arbitration process to fight the sanctions the UK imposed on him following the Russian aggression. He has previously initiated proceedings against a small nation for this reason, seeking $16bn: half that nation's annual revenue. Part of the legal team on his side? Cherie Blair, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

We were assured that these events could not occur. Previously, a government leader, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” An adviser on this matter described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries needed to fear ISDS claims. Warnings that “when companies grasp the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with general mockery.

That threat has come to pass. In the current period, energy and mining firms have lodged a historic level of claims against nations rich and poor, opposing – like the example of the Cumbrian coalmine – government attempts to halt global warming. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured the majority. That equates to the combined GDP