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What is your reckon our political system works? Maybe something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Advent of Shadow Courts

Today, overseas companies, or the billionaires who own them, are able to litigate against nation states for the policies they pass, at private courts made up of business advocates. Such disputes are conducted in secret. Differing from national judiciaries, these panels grant no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including businesses based in this country. The door is open only to businesses registered abroad.

Should an arbitration panel finds that a government measure may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not actual losses but compensation the panel members decide the company could potentially have made. The government might be compelled to rescind the measure. It becomes deterred from introducing similar legislation in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The consequence? Democratic sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the decisions made by elected bodies is that this stipulation has been written – absent public approval, and often in an atmosphere of total confidentiality – into trade treaties.

A Specific Case: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the High Court. The justice ruled that proposals to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have had zero effect on climate commitments. The new government then withdrew the permission the previous administration had granted. Now, this legal outcome is under threat by an foreign court answering to only the companies petitioning it.

In August, a company whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. The previous week a arbitration panel in the US capital was set up to hear it.

The company is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. The public has little idea how much this might be. Who is serving as its counsel in opposition to the British government? A sitting MP, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case at present, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK imposed on him subsequent to the war in Ukraine. He has initiated proceedings against another European state with similar intent, demanding $16bn: half that government’s yearly income. Included in the legal team acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists believe that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that these scenarios could not occur. In 2014, a former prime minister, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to investment treaty upon trade deal and we have never seen a issue in the past.” A consultant on this matter labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “when companies grasp the power they now possess, they will shift their focus from the poorer states to the strong ones” were greeted by scepticism.

That prediction has come to pass. In the current period, oil and gas and mining firms have lodged a record number of suits against nations rich and poor, challenging – like the example of the Whitehaven project – government attempts to prevent environmental catastrophe. Companies have to date won vast sums through ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP