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Can you understand our political system functions? It could be something like this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that used to be how it once functioned. No longer.

The Emergence of Shadow Courts

Today, international firms, or the wealthy individuals that control them, are able to litigate against elected administrations for the laws they pass, at private courts composed of business advocates. These proceedings are held in secret. Differing from national judiciaries, these panels grant no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even enterprises operating from this country. They are open exclusively to corporations based overseas.

If a tribunal finds that a legislative action could harm the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, running into billions.

These sums are based not on real financial harm but money the arbitrators conclude the company might otherwise have made. The government might be compelled to abandon its policy. It will be hesitant to passing future laws along the same lines, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of legal actions are being filed, as corporations take cues from each other, and private equity fund legal actions in return for a share of the awards. The outcome? Democratic sovereignty and democracy are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the choices made by parliaments is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Specific Example: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the High Court. The judge found that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the permission the Tories had approved. Today, this legal outcome could be compromised by an secret arbitration panel answering to no one but the corporations bringing the case.

Last August, a firm whose final controllers are based in the Cayman Islands filed a lawsuit versus the UK government. The previous week a arbitration panel in the US capital was convened to adjudicate on it.

The company is seeking compensation from the UK for the profits it might have made if the mine had been allowed to proceed. Citizens have little idea how much this might be. Which individual is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company contests it through an secretive arbitration panel, and a elected official works for its behalf.

An Oligarch's Lawsuit

On the same day that the court on the mining lawsuit was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case to date, but it is highly possible that he may employ the ISDS mechanism to contest the restrictions the UK imposed on him after the invasion of Ukraine. He has started suing another European state on these grounds, seeking $16bn: half that state's yearly income. Part of the counsel acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists believe that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Threats

The public was told that these events could not occur. In 2014, a senior politician, championing the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this topic accused critics of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations begin to understand the authority they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That prediction has now materialised. Recently, oil and gas and extraction companies have filed a record number of suits against nations rich and poor, challenging – as in the case of the UK mine – government attempts to halt global warming. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured the majority. That equates to the combined GDP