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What is your understand our democratic process works? Maybe similar to this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. Legislation is upheld by the courts. That's it. Well, that’s how it used to work. Those days are over.

The Rise of Shadow Courts

Nowadays, international firms, along with the oligarchs who own them, have the power to sue nation states for the regulations they pass, at private courts made up of corporate lawyers. These proceedings are held behind closed doors. In contrast to domestic courts, these tribunals grant no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies based in this country. They are open exclusively to corporations registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, potentially billions.

This compensation are based not on tangible damages but compensation the panel members determine the company would perhaps have made. The state may have to rescind the measure. It becomes deterred from passing future laws in that area, for fear of being sued.

A Process Spiralling Out of Control

Historically high figures of legal actions are being brought, as companies observe each other, and private equity bankroll lawsuits for a share of a cut of the awards. The consequence? Sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the decisions taken by elected bodies is that this clause has been written – without democratic mandate, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Concrete Example: The Whitehaven Coalmine

A year ago, a conservation group secured a significant win at the high court. The judge ruled that schemes to dig the first new deep coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no impact on our carbon budgets. The new government then withdrew the permission the Tories had approved. Today, this success could be compromised by an foreign court answering to exclusively the corporations petitioning it.

Last August, a firm whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in the United States was set up to adjudicate on it.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. We have no clear indication how much this might be. Who is acting on its behalf in opposition to the state? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The government passes a law, the national judiciary validates it, then a international entity disputes it through an undemocratic private court, and a sitting MP works for its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coalmine case was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case so far, but it is highly possible that he’ll use the arbitration process to challenge the penalties the UK enacted against him after the Russian aggression. He has already filed a claim against Luxembourg on these grounds, claiming $16bn: half that nation's annual revenue. Included in the lawyers acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen state funds as security for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

Empty Promises and Mounting Threats

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, promoting the largest and riskiest of all these agreements, declared: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” A consultant on this issue accused activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states had to worry about such legal actions. Warnings that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That threat has now materialised. This year, fossil fuel and extraction companies have initiated a record number of claims against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have to date won $114bn by using ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP