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Can you perceive our political system functions? It could be something like this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills become law. Legislation is maintained by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Shadow Courts

Today, overseas companies, or the oligarchs who own them, can sue governments for the regulations they pass, at private courts staffed by commercial attorneys. The cases take place in secret. Unlike our courts, these bodies grant no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even enterprises operating from this country. They are open only to businesses operating from foreign soil.

When a secret court rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

These sums represent not real financial harm but funds the arbitrators decide the company might otherwise have made. The administration may have to rescind the measure. It will be hesitant to passing future laws of a similar nature, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of cases are being filed, as firms observe each other, and investment funds finance suits in exchange for a share of the takings. The outcome? National sovereignty and popular rule are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the choices made by elected bodies is that this clause has been inserted – without democratic mandate, and often in an atmosphere of profound opacity – inside bilateral investment treaties.

A Concrete Case: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the senior court. The justice determined that proposals to excavate the first new deep coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the licence the former government had issued. Today, this success faces being overturned by an foreign court reporting to no one but the companies bringing the case.

During August, a corporate entity whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the US capital was convened to consider the case.

This firm is litigating against the UK for the revenue it might have made if the mine had been permitted to commence operations. The public has no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a foreign company disputes it through an secretive private court, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case at present, but it seems likely that he’ll use the ISDS mechanism to fight the penalties the UK imposed on him subsequent to the Russian aggression. He has previously started suing another European state with similar intent, demanding sixteen billion dollars: an amount representing half government’s yearly income. Among the legal team on his side? the wife of a former prime minister, married to the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that such things could not occur. Years ago, a government leader, championing the largest and riskiest of all investment pacts, declared: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” An expert on this topic described critics of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies grasp the power they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That prediction is now a reality. This year, oil and gas and resource corporations have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to stop climate breakdown. Companies have so far won vast sums through ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP