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Can you perceive our system of government works? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills become law. The law is upheld by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Advent of Shadow Courts

Nowadays, overseas companies, or the wealthy individuals who own them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. Such disputes are conducted in secret. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises operating from this country. The door is open solely for corporations registered abroad.

When a secret court rules that a government measure could harm the corporation’s expected profits, it can award damages of hundreds of millions, potentially billions.

This compensation represent not actual losses but compensation the arbitrators determine the company could potentially have made. The administration could be forced to abandon its policy. It is deterred from enacting future policies of a similar nature, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of legal actions are being brought, as firms observe each other, and private equity finance suits in exchange for a share of the takings. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the rulings made by legislatures is that this clause has been written – without democratic mandate, and frequently under a climate of total confidentiality – inside trade treaties.

A Concrete Example: The UK Coalmine

A year ago, a conservation group secured a significant win at the high court. The judge ruled that schemes to dig the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on climate commitments. The incoming administration then withdrew the consent the former government had issued. Currently, this victory is under threat by an foreign court accountable to exclusively the companies petitioning it.

In August, a company whose beneficial owners are based in the Cayman Islands filed a lawsuit versus the UK government. Last week a dispute settlement body in the US capital was convened to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to proceed. We have no idea how much this could amount to. What legal team is representing it challenging the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the high court supports it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coalmine case was established, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case to date, but it is highly possible that he may employ the tribunal to fight the sanctions the UK levied against him after the Russian aggression. He has previously filed a claim against another European state with similar intent, seeking sixteen billion dollars: half that nation's yearly budget. Among the counsel representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars argue that the EU’s delay in leveraging immobilised oligarchs' funds as security for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over sovereign states may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Risks

The public was told that these scenarios were not possible. In 2014, a former prime minister, promoting the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a issue in the past.” An adviser on this matter accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states had to worry about these lawsuits. Predictions that “when companies start to realise the power they’ve been granted, they will turn their attention from the poorer states to the developed economies” were met with general mockery.

That prediction has come to pass. In the current period, fossil fuel and extraction companies have filed a record number of suits against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Companies have so far won vast sums via ISDS, of which energy giants have obtained the majority. That represents the combined GDP