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Can you perceive our system of government operates? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. Simple as that. However, that’s how it used to work. Those days are over.

The Rise of Shadow Courts

In the modern era, international firms, or the oligarchs that control them, can sue elected administrations for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these bodies provide no avenue for appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, including enterprises based in this country. They are open exclusively to entities operating from foreign soil.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These sums are based not on actual losses but compensation the panel members decide the company might otherwise have made. The government could be forced to abandon its policy. It becomes hesitant to passing future laws in that area, worried about being sued.

A System Running Rampant

Record numbers of cases are being initiated, as corporations learn from each other, and hedge funds fund legal actions in exchange for a portion of the takings. The consequence? Democratic sovereignty and democratic governance are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the decisions enacted by elected bodies is that this clause has been written – without public consent, and often in an atmosphere of profound opacity – within international trade agreements.

A Specific Example: The UK Coalmine

Twelve months ago, activists won a great victory at the High Court. The judge ruled that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The Labour government later cancelled the permission the Tories had approved. Now, this success could be compromised by an secret arbitration panel accountable to exclusively the companies filing the suit.

In August, a corporate entity whose final controllers are located in the Cayman Islands filed a lawsuit against the UK government. Recently a tribunal in the US capital was set up to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has no idea how much this could amount to. Which individual is representing it in opposition to the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a overseas corporation contests it through an undemocratic private court, and a sitting MP acts on its behalf.

The Russian Challenge

On the same day that the court on the coal mine dispute was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case so far, but it seems likely that he’ll use the arbitration process to contest the restrictions the UK levied against him after the Russian aggression. He has previously initiated proceedings against a small nation for this reason, demanding $16bn: an amount representing half state's yearly budget. Included in the legal team on his side? the wife of a former prime minister, married to the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized state funds as security for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Risks

Politicians promised that such things could not occur. Previously, a government leader, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this topic accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Warnings that “when companies grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were met with general mockery.

That warning has come to pass. Recently, oil and gas and mining firms have filed a historic level of claims against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have to date won $114bn via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP