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How do you perceive our political system functions? It could be along the lines of this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. End of story. However, that’s how it operated in the past. No longer.

The Advent of Shadow Courts

Today, international firms, or the billionaires that control them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. They are open only to corporations operating from foreign soil.

When a secret court finds that a law or policy could harm the corporation’s projected profits, it may order compensation of vast sums, even billions.

These sums represent not actual losses but compensation the tribunal officials conclude the company could potentially have made. The government might be compelled to drop the legislation. It will be hesitant to introducing similar legislation of a similar nature, due to the risk of being sued.

A Process Running Rampant

Historically high figures of disputes are being brought, as firms take cues from each other, and private equity finance suits for a share of a portion of the awards. The outcome? Sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the rulings enacted by legislatures is that this stipulation has been written – without democratic mandate, and typically amid a climate of profound opacity – inside bilateral investment treaties.

A Specific Instance: The UK Coal Mine

A year ago, a conservation group secured a significant win at the High Court. The presiding officer determined that schemes to dig the first new deep coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine could have no consequence on our carbon budgets. The incoming administration then withdrew the consent the former government had granted. Today, this legal outcome could be compromised by an foreign court accountable to no one but the entities bringing the case.

In August, a company whose final controllers reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was established to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to go ahead. We have no idea how much this sum represents. Who is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a foreign company contests it through an secretive offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case to date, but it appears probable that he may employ the arbitration process to fight the sanctions the UK levied against him after the war in Ukraine. He has previously filed a claim against Luxembourg with similar intent, demanding $16bn: half that state's yearly income. Among the counsel on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in using frozen state funds as security for its financial support package is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments may be obstructing the funds Ukraine desperately needs.

False Assurances and Mounting Threats

We were assured that such things were not possible. In 2014, a government leader, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this topic described campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “when companies grasp the power they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That prediction is now a reality. This year, energy and resource corporations have filed a record number of suits against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP