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Can you reckon our system of government functions? Perhaps similar to this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation is maintained by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Emergence of Shadow Courts

Today, international firms, and the oligarchs who own them, can sue governments for the policies they pass, at private courts composed of corporate lawyers. These proceedings take place behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even enterprises based in this country. They are open exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

This compensation represent not real financial harm but money the tribunal officials determine the company could potentially have made. The administration could be forced to drop the legislation. It is hesitant to enacting future policies in that area, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of disputes are being initiated, as firms observe each other, and investment funds bankroll lawsuits in return for a cut of the takings. The consequence? National sovereignty and democracy are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices enacted by parliaments is that this clause has been inserted – absent public approval, and often in conditions of profound opacity – inside trade treaties.

A Real-World Case: The Whitehaven Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The presiding officer determined that proposals to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no consequence on climate commitments. The new government later cancelled the licence the former government had approved. Currently, this legal outcome could be compromised by an foreign court reporting to only the entities bringing the case.

During August, a firm whose ultimate owners reside in the tax haven lodged a claim challenging the UK government. The previous week a tribunal in the United States was convened to adjudicate on it.

This firm is suing the UK for the money it would have generated if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. What legal team is acting on its behalf against the British government? A member of parliament, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court supports it, then a overseas corporation challenges it through an secretive private court, and a elected official works for its behalf.

The Russian Lawsuit

On the same day that the court on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case so far, but it appears probable that he may employ the tribunal to challenge the penalties the UK imposed on him after the war in Ukraine. He has initiated proceedings against a small nation on these grounds, demanding a colossal sum: half that nation's yearly income. Part of the legal team acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Costs

We were assured that these scenarios were not possible. Previously, a government leader, promoting the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and there has not been a case in the past.” A consultant on this matter described activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations grasp the authority bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were greeted by scepticism.

That threat is now a reality. Recently, energy and extraction companies have filed a historic level of cases against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to halt climate breakdown. Corporations have so far won $114bn through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP