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What is your understand our political system works? Maybe similar to this. We elect MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Statutes are enforced by the courts. End of story. However, that used to be how it once functioned. Those days are over.

The Rise of Shadow Courts

Today, international firms, and the wealthy individuals who own them, are able to litigate against governments for the policies they pass, at private courts made up of business advocates. These proceedings are conducted behind closed doors. In contrast to domestic courts, these bodies provide no opportunity to appeal or judicial review. You or I cannot take a case to them, nor can our government, or even businesses operating from this country. The door is open exclusively to businesses registered abroad.

Should an arbitration panel finds that a government measure may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

These sums constitute not actual losses but funds the panel members decide the company would perhaps have made. The state could be forced to rescind the measure. It becomes discouraged from passing future laws of a similar nature, due to the risk of being sued.

A Mechanism Growing Exponentially

Historically high figures of disputes are being filed, as companies take cues from each other, and investment funds bankroll lawsuits in return for a portion of the awards. The result? Democratic sovereignty and democratic governance are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions taken by elected bodies is that this provision has been incorporated – without democratic mandate, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Last year, activists secured a significant win at the high court. The justice determined that schemes to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the consent the former government had granted. Currently, this legal outcome is under threat by an offshore tribunal accountable to no one but the entities petitioning it.

During August, a corporate entity whose final controllers are based in the offshore financial centre initiated proceedings against the UK government. The previous week a tribunal in the US capital was established to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been permitted to commence operations. Citizens have no idea how much this might be. What legal team is representing it against the British government? A member of parliament, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the high court upholds it, then a international entity disputes it through an secretive private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it appears probable that he may employ the ISDS mechanism to contest the penalties the UK levied against him subsequent to the war in Ukraine. He has previously started suing Luxembourg for this reason, demanding a colossal sum: an amount representing half state's yearly income. Included in the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, stated: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this matter described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with widespread derision.

That warning is now a reality. This year, energy and extraction companies have filed a historic level of suits against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – state efforts to halt global warming. Corporations have thus far won $114bn through ISDS, of which energy giants have secured $84bn. That represents the combined GDP