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What is your reckon our political system operates? It could be something like this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. Well, that’s how it used to work. No longer.

The Emergence of Shadow Courts

Nowadays, international firms, or the wealthy individuals behind them, can sue governments for the regulations they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held in secret. Unlike our courts, these bodies provide no opportunity to appeal or oversight by judges. The general public cannot take a case to them, nor can our government, including enterprises based in this country. Access is granted solely for corporations registered abroad.

Should an arbitration panel rules that a government measure could harm the corporation’s projected profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but compensation the arbitrators determine the company would perhaps have made. The administration might be compelled to drop the legislation. It will be discouraged from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being brought, as firms take cues from each other, and hedge funds finance suits in return for a cut of the awards. The consequence? Democratic sovereignty and democratic governance are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the rulings taken by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The judge found that proposals to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration subsequently revoked the permission the former government had approved. Today, this success faces being overturned by an offshore tribunal reporting to no one but the entities filing the suit.

Last August, a corporate entity whose ultimate owners are located in the tax haven filed a lawsuit challenging the UK government. Last week a tribunal in the US capital was set up to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this sum represents. What legal team is serving as its counsel challenging the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

The Russian Challenge

Simultaneously that the tribunal on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case to date, but it is highly possible that he may employ the ISDS mechanism to fight the sanctions the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of state's yearly income. Among the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

Trade specialists contend that the EU’s procrastination in leveraging immobilised Russian assets as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Mounting Threats

We were assured that these scenarios could not occur. In 2014, a government leader, championing the largest and riskiest of all such treaties, declared: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” A consultant on this matter described activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “once firms begin to understand the influence they now possess, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has come to pass. This year, fossil fuel and mining firms have filed a unprecedented number of claims against nations rich and poor, challenging – similar to the UK mine – state efforts to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP