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What is your perceive our system of government works? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills become law. The law is upheld by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Advent of Shadow Courts

Nowadays, foreign corporations, or the billionaires behind them, can sue elected administrations for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases take place in secret. Differing from national judiciaries, these panels allow no right of appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. They are open exclusively to corporations operating from foreign soil.

When a secret court rules that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant damages of vast sums, even billions.

These sums are based not on real financial harm but money the panel members conclude the company could potentially have made. The state might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being brought, as firms observe each other, and private equity fund legal actions in return for a share of the awards. The consequence? National sovereignty and popular rule are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions taken by legislatures is that this stipulation has been written – without public consent, and typically amid an atmosphere of profound opacity – into trade treaties.

A Specific Example: The UK Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The justice found that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the previous government, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The new government later cancelled the consent the Tories had approved. Now, this success faces being overturned by an foreign court reporting to exclusively the corporations petitioning it.

During August, a company whose beneficial owners are based in the Cayman Islands filed a lawsuit against the UK government. Last week a tribunal in the US capital was set up to hear it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had been allowed to proceed. The public has no idea how much this sum represents. Who is acting on its behalf against the state? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration makes a decision, the high court upholds it, then a foreign company contests it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the mining lawsuit was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it seems likely that he’ll use the ISDS mechanism to fight the penalties the UK imposed on him after the Russian aggression. He has previously initiated proceedings against another European state for this reason, demanding sixteen billion dollars: an amount representing half state's yearly budget. Among the lawyers on his side? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as collateral 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 remarkable, secretive influence over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that such things were not possible. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this matter accused campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “when companies grasp the power they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That threat is now a reality. Recently, fossil fuel and mining firms have initiated a record number of claims against nations rich and poor, challenging – like the example of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP