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Can you understand our democratic process functions? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. End of story. However, that was how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

Nowadays, international firms, or the wealthy individuals who own them, can sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. These proceedings take place behind closed doors. Differing from national judiciaries, these bodies grant no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, including enterprises headquartered in this country. The door is open exclusively to corporations based overseas.

Should an arbitration panel finds that a law or policy may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, potentially billions.

These sums represent not real financial harm but money the panel members determine the company might otherwise have made. The government could be forced to abandon its policy. It becomes deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as companies take cues from each other, and hedge funds fund legal actions in exchange for a portion of the takings. The result? Sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings enacted by elected bodies is that this clause has been written – absent public approval, and often in a climate of extreme secrecy – into trade treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge found that proposals to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have zero effect on national carbon targets. The Labour government later cancelled the consent the previous administration had granted. Currently, this victory could be compromised by an secret arbitration panel reporting to exclusively the corporations bringing the case.

In August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings against the UK government. Last week a dispute settlement body in Washington DC was established to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. The public has no idea how much this sum represents. Which individual is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court supports it, then a foreign company contests it through an unaccountable private court, and a elected official acts on its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know little of the case to date, but it is highly possible that he may employ the arbitration process to fight the penalties the UK levied against him after the Russian aggression. He has filed a claim against a small nation with similar intent, claiming a colossal sum: an amount representing half nation's annual revenue. Part of the counsel acting for him in that case? Cherie Blair, wife of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over sovereign states may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Mounting Costs

Politicians promised that such things could not occur. Years ago, a former prime minister, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this topic labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states had to worry about such legal actions. Warnings that “once firms start to realise the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were greeted by general mockery.

That threat has come to pass. Recently, energy and extraction companies have filed a record number of suits against nations both wealthy and developing, contesting – as in the case of the UK mine – official measures to stop environmental catastrophe. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP