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What is your perceive our political system works? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills pass into law. The law are enforced by the courts. End of story. Well, that used to be how it operated in the past. Those days are over.

The Rise of Shadow Courts

In the modern era, overseas companies, or the billionaires that control them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place behind closed doors. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. The door is open only to corporations based overseas.

Should an arbitration panel rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums are based not on real financial harm but compensation the arbitrators determine the company might otherwise have made. The government could be forced to drop the legislation. It is hesitant to passing future laws along the same lines, worried about incurring a lawsuit.

A Process Running Rampant

Historically high figures of cases are being initiated, as firms learn from each other, and investment funds finance suits for a share of a portion of the awards. The outcome? Sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the rulings taken by elected bodies is that this clause has been incorporated – without public consent, and frequently under conditions of total confidentiality – inside bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the senior court. The justice ruled that schemes to excavate the first deep coalmine in the UK for 30 years, in northwest England, were unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no impact on national carbon targets. The new government later cancelled the permission the former government had approved. Today, this success faces being overturned by an offshore tribunal reporting to no one but the companies filing the suit.

During August, a corporate entity whose final controllers are based in the Cayman Islands initiated proceedings against the UK government. Last week a arbitration panel in Washington DC was set up to hear it.

The claimant is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. Citizens have no clear indication how much this sum represents. Who is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case so far, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK levied against him after the Russian aggression. He has initiated proceedings against another European state on these grounds, seeking sixteen billion dollars: half that government’s yearly budget. Among the legal team on his side? a prominent lawyer, married to the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as security for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments could be blocking 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, stated: “The UK has signed trade agreement upon trade deal and there has never been a case in the past.” An expert on this topic labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “when companies grasp the influence they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with scepticism.

That threat is now a reality. This year, oil and gas and mining firms have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – state efforts to prevent climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP