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What is your understand our system of government functions? It could be something like this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. However, that’s how it used to work. No longer.

The Emergence of Shadow Courts

Today, foreign corporations, and the oligarchs who own them, can sue governments for the laws they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted in secret. Differing from national judiciaries, these tribunals grant no avenue for appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted solely for corporations registered abroad.

When a secret court rules that a law or policy may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These sums represent not tangible damages but compensation the panel members conclude the company would perhaps have made. The state may have to drop the legislation. It will be hesitant to passing future laws in that area, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of disputes are being brought, as companies learn from each other, and hedge funds bankroll lawsuits for a share of a share of the takings. The consequence? Democratic sovereignty and democracy are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the decisions made by elected bodies is that this clause has been incorporated – absent public approval, and typically amid an atmosphere of profound opacity – inside trade treaties.

A Real-World Case: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to open the first major coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on climate commitments. The new government then withdrew the permission the previous administration had approved. Currently, this legal outcome could be compromised by an offshore tribunal reporting to only the companies filing the suit.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a dispute settlement body in Washington DC was set up to consider the case.

The claimant is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. The public has no idea how much this could amount to. What legal team is representing it challenging the state? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a overseas corporation challenges it through an unaccountable private court, and a sitting MP acts on its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case at present, but it is highly possible that he may employ the tribunal to challenge the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously initiated proceedings against another European state with similar intent, demanding a colossal sum: half that government’s yearly income. Included in the lawyers representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine critically depends on.

Empty Promises and Growing Costs

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all such treaties, declared: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An expert on this matter accused campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “as corporations grasp the influence they’ve been granted, they will turn their attention from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction has come to pass. In the current period, fossil fuel and extraction companies have lodged a unprecedented number of suits against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Firms have to date won $114bn through ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP