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What is your reckon our political system functions? Maybe something like this. We elect MPs. They vote on bills. If a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. Yet, that was how it used to work. Those days are over.

The Rise of Shadow Courts

In the modern era, international firms, or the billionaires behind them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are held behind closed doors. Unlike our courts, these tribunals provide no right of appeal or judicial review. You or I are unable to file a case to them, nor can our government, including enterprises headquartered in this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, even billions.

This compensation constitute not tangible damages but money the arbitrators conclude the company could potentially have made. The state might be compelled to rescind the measure. It is hesitant to introducing similar legislation in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as firms observe each other, and private equity finance suits for a share of a share of the settlements. The result? Democratic sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the rulings taken by elected bodies is that this clause has been written – without public consent, and typically amid conditions of profound opacity – inside bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The judge determined that schemes to excavate the first major coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The new government then withdrew the licence the former government had granted. Now, this victory is under threat by an foreign court accountable to exclusively the corporations filing the suit.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

This firm is suing the UK for the revenue it might have made if the mine had been permitted to proceed. Citizens have no idea how much this might be. What legal team is acting on its behalf 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 domestic court upholds it, then a overseas corporation challenges it through an unaccountable private court, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case so far, but it seems likely that he will utilise the arbitration process to contest the penalties the UK levied against him following the war in Ukraine. He has previously initiated proceedings against a small nation on these grounds, seeking sixteen billion dollars: half that government’s yearly budget. Part of the legal team representing him there? a prominent lawyer, spouse of the former British prime minister.

Trade specialists contend that the EU’s hesitation in using frozen Russian assets as security for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine urgently requires.

Empty Promises and Escalating Costs

The public was told that such things were not possible. In 2014, a senior politician, advocating for the biggest and most dangerous of all investment pacts, declared: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this matter described critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states needed to fear such legal actions. Predictions that “once firms grasp the power they now possess, they will redirect their efforts from the weak nations to the developed economies” were met with widespread derision.

That warning has now materialised. Recently, oil and gas and resource corporations have lodged a record number of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – government attempts to halt climate breakdown. Firms have thus far won vast sums through ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP