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What is your understand our political system works? It could be something like this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. Yet, that’s how it once functioned. Those days are over.

The Advent of Shadow Courts

In the modern era, international firms, or the billionaires who own them, can sue governments for the laws they pass, at secret arbitration panels composed of corporate lawyers. The cases take place behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises headquartered in this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel finds that a legislative action might diminish the corporation’s expected profits, it can award compensation of vast sums, even billions.

This compensation are based not on real financial harm but compensation the tribunal officials decide the company would perhaps have made. The administration might be compelled to rescind the measure. It will be deterred from enacting future policies in that area, worried about incurring a lawsuit.

A Process Running Rampant

Historically high figures of legal actions are being brought, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The result? National sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices enacted by parliaments is that this clause has been inserted – absent public approval, and frequently under conditions of extreme secrecy – inside international trade agreements.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The judge determined that proposals to open the first major coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The incoming administration subsequently revoked the licence the Tories had granted. Today, this legal outcome faces being overturned by an offshore tribunal answering to no one but the corporations bringing the case.

In August, a company whose final controllers are based in the Cayman Islands initiated proceedings against the UK government. Recently a dispute settlement body in the United States was convened to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had received permission to proceed. We have no idea how much this could amount to. Which individual is representing it challenging the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

A Sanctions Case

Simultaneously that the panel on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the penalties the UK enacted against him following the war in Ukraine. He has already started suing another European state with similar intent, claiming a colossal sum: half that nation's annual revenue. Included in the counsel on his side? a prominent lawyer, spouse of 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 subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that such things wouldn’t happen. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty upon trade deal and we have never seen a problem in the past.” An adviser on this matter labelled campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear these lawsuits. Predictions that “when companies grasp the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were greeted by scepticism.

That prediction has now materialised. This year, oil and gas and extraction companies have filed a unprecedented number of claims against nations across the economic spectrum, contesting – like the example of the UK mine – government attempts to stop environmental catastrophe. Companies have to date won vast sums via ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP