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What is your understand our system of government works? It could be something like this. We elect MPs. They vote on bills. If a majority is obtained, the bills become law. The law are enforced by the courts. End of story. However, that was how it once functioned. Those days are over.

The Advent of Shadow Courts

Nowadays, international firms, or the oligarchs that control them, can sue governments for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes take place in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses based in this country. They are open solely for entities operating from foreign soil.

If a tribunal finds that a law or policy may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums constitute not tangible damages but compensation the arbitrators determine the company could potentially have made. The administration might be compelled to abandon its policy. It becomes discouraged from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A System Running Rampant

Historically high figures of cases are being filed, as companies learn from each other, and investment funds finance suits in exchange for a portion of the takings. The outcome? Democratic sovereignty and democracy are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the rulings taken by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under an atmosphere of profound opacity – into international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no consequence on our carbon budgets. The new government subsequently revoked the consent the former government had issued. Now, this success faces being overturned by an secret arbitration panel accountable to no one but the corporations petitioning it.

Last August, a firm whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a dispute settlement body in Washington DC was established to consider the case.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had received permission to go ahead. Citizens have no idea how much this sum represents. What legal team is representing it in opposition to the state? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The administration makes a decision, the domestic court upholds it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case to date, but it appears probable that he will utilise the tribunal to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has already started suing another European state with similar intent, demanding $16bn: half that government’s annual revenue. Part of the lawyers on his side? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over democratic administrations may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Threats

The public was told that such things wouldn’t happen. In 2014, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” An expert on this issue accused activists of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were greeted by widespread derision.

That warning has now materialised. In the current period, energy and resource corporations have lodged a historic level of suits against nations across the economic spectrum, contesting – similar to the UK mine – official measures to stop environmental catastrophe. Corporations have to date won $114bn through ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP