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How do you understand our democratic process functions? Perhaps something like this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. That's it. However, that’s how it used to work. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, and the oligarchs who own them, are able to litigate against nation states for the laws they pass, at private courts composed of business advocates. Such disputes take place behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open solely for entities based overseas.

If a tribunal determines that a government measure may compromise the corporation’s expected profits, it may order compensation of hundreds of millions, even billions.

These sums are based not on actual losses but money the panel members determine the company might otherwise have made. The state could be forced to drop the legislation. It is hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A Process Growing Exponentially

Historically high figures of disputes are being filed, as corporations observe each other, and private equity bankroll lawsuits in return for a portion of the takings. The result? National sovereignty and popular rule are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices made by elected bodies is that this provision has been incorporated – without democratic mandate, and frequently under conditions of total confidentiality – inside bilateral investment treaties.

A Real-World Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on our carbon budgets. The incoming administration then withdrew the licence the Tories had issued. Today, this victory could be compromised by an foreign court answering to no one but the entities petitioning it.

In August, a corporate entity whose final controllers reside in the tax haven filed a lawsuit versus the UK government. The previous week a dispute settlement body in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. We have little idea how much this might be. Which individual is acting on its behalf challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government passes a law, the domestic court supports it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official represents its behalf.

The Russian Case

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he’ll use the arbitration process to fight the sanctions the UK imposed on him after the Russian aggression. He has previously started suing Luxembourg on these grounds, seeking $16bn: an amount representing half state's annual revenue. Among the counsel on his side? a prominent lawyer, spouse of the former British prime minister.

Trade specialists argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its financial support package stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Threats

Politicians promised that such things were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all investment pacts, told us: “We’ve signed investment treaty upon trade deal and we have never seen a case in the past.” An expert on this issue described critics of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear these lawsuits. Predictions that “when companies grasp the power bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were greeted by general mockery.

That warning is now a reality. Recently, oil and gas and resource corporations have lodged a historic level of claims against nations across the economic spectrum, opposing – as in the case of the UK mine – state efforts to stop climate breakdown. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That equates to the combined GDP