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Can you perceive our political system functions? It could be along the lines of this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that was how it operated in the past. Not anymore.

The Advent of Shadow Courts

Today, foreign corporations, along with the oligarchs behind them, can sue nation states for the policies they pass, at private courts staffed by commercial attorneys. The cases are held behind closed doors. In contrast to domestic courts, these panels allow no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including businesses based in this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of vast sums, potentially billions.

These sums represent not real financial harm but compensation the tribunal officials conclude the company would perhaps have made. The state might be compelled to rescind the measure. It becomes deterred from enacting future policies in that area, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being initiated, as corporations observe each other, and private equity bankroll lawsuits in return for a share of the settlements. The result? Democratic sovereignty and democratic governance are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the decisions made by elected bodies is that this provision has been incorporated – without democratic mandate, and typically amid a climate of extreme secrecy – within international trade agreements.

A Specific Case: The UK Coal Mine

Last year, activists achieved a major legal triumph at the high court. The justice ruled that schemes to dig the first deep coalmine in the UK for a generation, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The new government then withdrew the licence the Tories had approved. Now, this victory is under threat by an foreign court accountable to no one but the entities petitioning it.

In August, a firm whose beneficial owners are based in the tax haven lodged a claim versus the UK government. The previous week a dispute settlement body in Washington DC was convened to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. We have no idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? An elected representative, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the domestic court validates it, then a foreign company challenges it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Case

Simultaneously that the court on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know scarce of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK enacted against him subsequent to the Russian aggression. He has filed a claim against Luxembourg with similar intent, seeking a colossal sum: half that nation's yearly income. Part of the lawyers on his side? the wife of a former prime minister, married to the former British prime minister.

Legal experts argue that the EU’s hesitation in using frozen Russian assets as collateral for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine critically depends on.

Misleading Claims and Escalating Threats

We were assured that such things could not occur. In 2014, a former prime minister, championing the largest and riskiest of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has not been a problem in the past.” An adviser on this issue accused campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will shift their focus from the weak nations to the developed economies” were greeted by scepticism.

That warning has now materialised. This year, fossil fuel and mining firms have lodged a record number of suits against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP