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How do you understand our political system works? Perhaps something like this. We elect MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. End of story. Well, that used to be how it operated in the past. Not anymore.

The Emergence of Shadow Courts

Today, foreign corporations, and the wealthy individuals behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted in secret. In contrast to domestic courts, these panels allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted exclusively to corporations operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s anticipated profits, it may order damages of vast sums, potentially billions.

These awards represent not actual losses but funds the arbitrators conclude the company would perhaps have made. The government may have to abandon its policy. It will be discouraged from enacting future policies along the same lines, for fear of being sued.

A Process Running Rampant

Historically high figures of cases are being initiated, as firms take cues from each other, and private equity fund legal actions in exchange for a cut of the takings. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the decisions enacted by parliaments is that this provision has been incorporated – without public consent, and typically amid an atmosphere of extreme secrecy – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer ruled that proposals to open the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine could have zero effect on climate commitments. The new government later cancelled the licence the former government had issued. Today, this legal outcome is under threat by an foreign court answering to only the corporations petitioning it.

Last August, a firm whose final controllers are located in the Cayman Islands initiated proceedings against the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. The public has little idea how much this could amount to. Who is serving as its counsel against the state? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a international entity disputes it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Case

Concurrently that the court on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it seems likely that he’ll use the tribunal to fight the sanctions the UK levied against him following the war in Ukraine. He has filed a claim against Luxembourg with similar intent, demanding a colossal sum: an amount representing half state's annual revenue. Part of the counsel acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen state funds as guarantee for its financial support package is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

False Assurances and Growing Risks

Politicians promised that these scenarios were not possible. In 2014, a government leader, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a case in the past.” A consultant on this matter described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “when companies start to realise the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That prediction is now a reality. Recently, fossil fuel and extraction companies have filed a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – government attempts to prevent global warming. Companies have thus far won vast sums through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP