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Can you understand our political system functions? Maybe something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Statutes is maintained by the courts. Simple as that. Yet, that was how it operated in the past. No longer.

The Rise of Shadow Courts

Today, international firms, and the billionaires that control them, have the power to sue nation states for the regulations they pass, at secret arbitration panels composed of commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these bodies allow no right of appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even businesses based in this country. They are open exclusively to entities based overseas.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

This compensation represent not actual losses but funds the arbitrators determine the company would perhaps have made. The administration might be compelled to abandon its policy. It is discouraged from introducing similar legislation in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of disputes are being initiated, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a share of the settlements. The outcome? Democratic sovereignty and democracy are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the choices enacted by legislatures is that this stipulation has been incorporated – without public consent, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Real-World Case: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that schemes to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no impact on our carbon budgets. The Labour government subsequently revoked the consent the previous administration had issued. Currently, this victory is under threat by an foreign court answering to exclusively the companies filing the suit.

In August, a company whose final controllers reside in the Cayman Islands initiated proceedings against the UK government. The previous week a dispute settlement body in Washington DC was established to consider the case.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to commence operations. The public has no clear indication how much this sum represents. Who is serving as its counsel challenging the British government? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

The Russian Case

Concurrently that the court on the coalmine case was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case so far, but it is highly possible that he’ll use the ISDS mechanism to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has initiated proceedings against Luxembourg for this reason, claiming a colossal sum: an amount representing half government’s annual revenue. Included in the lawyers on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in using frozen state funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that these scenarios could not occur. Previously, a government leader, promoting the biggest and most dangerous of all these agreements, stated: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this issue accused campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries needed to fear these lawsuits. Warnings that “when companies start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the strong ones” were greeted by scepticism.

That threat has come to pass. Recently, fossil fuel and extraction companies have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the UK mine – official measures to stop environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP