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What is your perceive our system of government works? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills pass into law. Statutes is upheld by the courts. That's it. Well, that’s how it once functioned. Not anymore.

The Advent of Shadow Courts

Nowadays, overseas companies, or the wealthy individuals that control them, have the power to sue governments for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases are conducted behind closed doors. Unlike our courts, these panels grant no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises headquartered in this country. Access is granted solely for entities based overseas.

When a secret court determines that a law or policy could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

This compensation constitute not actual losses but compensation the arbitrators decide the company would perhaps have made. The administration might be compelled to abandon its policy. It is hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations take cues from each other, and investment funds finance suits for a share of a portion of the settlements. The consequence? Sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions made by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid a climate of extreme secrecy – into trade treaties.

A Real-World Example: The UK Coal Mine

A year ago, activists won a great victory at the senior court. The judge ruled that schemes to open the first major coal mine in the UK for a generation, in northwest England, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the consent the Tories had issued. Now, this success faces being overturned by an foreign court reporting to no one but the companies petitioning it.

Last August, a corporate entity whose beneficial owners are based in the tax haven lodged a claim versus the UK government. Last week a dispute settlement body in Washington DC was convened to consider the case.

The claimant is litigating against the UK for the money it could have earned if the mine had received permission to go ahead. The public has no idea how much this sum represents. Who is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The government makes a decision, the domestic court validates it, then a international entity contests it through an undemocratic private court, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the sanctions the UK levied against him after the Russian aggression. He has already started suing Luxembourg with similar intent, demanding sixteen billion dollars: half that government’s annual revenue. Part of the lawyers representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Costs

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, championing the most significant and hazardous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” An adviser on this matter accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the developed economies” were greeted by scepticism.

That prediction has come to pass. This year, oil and gas and resource corporations have lodged a record number of claims against nations rich and poor, opposing – like the example of the Cumbrian coalmine – government attempts to prevent climate breakdown. Firms have thus far won $114bn by using ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP