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What is your perceive our democratic process functions? Perhaps similar to this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that used to be how it once functioned. Not anymore.

The Rise of Shadow Courts

Nowadays, foreign corporations, or the billionaires behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals staffed by business advocates. Such disputes are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. You or I cannot take a case to them, nor can our government, including companies operating from this country. The door is open solely for corporations based overseas.

Should an arbitration panel determines that a legislative action might diminish the corporation’s expected profits, it may order damages of hundreds of millions, potentially billions.

This compensation constitute not real financial harm but funds the arbitrators determine the company could potentially have made. The government may have to abandon its policy. It becomes deterred from enacting future policies of a similar nature, worried about incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of disputes are being initiated, as companies take cues from each other, and private equity fund legal actions in exchange for a cut of the settlements. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices made by elected bodies is that this provision has been inserted – absent public approval, and frequently under an atmosphere of extreme secrecy – inside trade treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, environmental campaigners won a great victory at the High Court. The judge determined that plans to open the first deep coalmine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no impact on climate commitments. The Labour government then withdrew the consent the previous administration had issued. Currently, this legal outcome is under threat by an offshore tribunal answering to no one but the corporations filing the suit.

In August, a corporate entity whose ultimate owners are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in the United States was established to hear it.

This firm is suing the UK for the money it could have earned if the mine had received permission to proceed. Citizens have no idea how much this might be. What legal team is serving as its counsel in opposition to the UK administration? A sitting MP, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a foreign company challenges it through an secretive offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case at present, but it seems likely that he’ll use the tribunal to contest the sanctions the UK imposed on him following the Russian aggression. He has previously filed a claim against a small nation for this reason, claiming a colossal sum: an amount representing half state's yearly income. Part of the legal team on his side? a prominent lawyer, spouse of the ex-UK leader.

International law scholars believe that the EU’s delay in using frozen oligarchs' funds as security for its financial support package is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

The public was told that such things wouldn’t happen. Previously, a government leader, advocating for the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” An expert on this topic labelled activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear ISDS claims. Warnings that “once firms begin to understand the power they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That prediction has come to pass. In the current period, energy and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have to date won vast sums through ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP