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How do you reckon our system of government functions? Perhaps something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills become law. The law is maintained by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Emergence of Shadow Courts

In the modern era, international firms, or the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at private courts made up of corporate lawyers. The cases take place behind closed doors. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses based in this country. They are open solely for entities operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it may order damages of vast sums, even billions.

These sums are based not on actual losses but money the tribunal officials conclude the company might otherwise have made. The government may have to drop the legislation. It will be hesitant to enacting future policies along the same lines, due to the risk of facing litigation.

A Process Growing Exponentially

Historically high figures of legal actions are being brought, as companies take cues from each other, and private equity finance suits for a share of a portion of the settlements. The outcome? National sovereignty and democratic governance are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the rulings taken by legislatures is that this provision has been written – without democratic mandate, and typically amid a climate of total confidentiality – inside international trade agreements.

A Specific Instance: The UK Coalmine

Twelve months ago, activists won a great victory at the High Court. The presiding officer ruled that plans to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the permission the previous administration had granted. Currently, this success faces being overturned by an secret arbitration panel reporting to only the companies bringing the case.

Last August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. Recently a tribunal in the US capital was set up to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. We have no idea how much this could amount to. Who is acting on its behalf in opposition to the British government? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The administration passes a law, the national judiciary supports it, then a international entity contests it through an unaccountable private court, and a sitting MP works for its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it appears probable that he may employ the ISDS mechanism to contest the penalties the UK imposed on him following the Russian aggression. He has already filed a claim against a small nation for this reason, claiming sixteen billion dollars: equivalent to half of state's yearly budget. Included in the counsel on his side? Cherie Blair, spouse of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states may be obstructing the finance Ukraine desperately needs.

False Assurances and Mounting Costs

Politicians promised that these events wouldn’t happen. Previously, a senior politician, promoting the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” An expert on this topic described critics of “alarmism … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the power bestowed upon them, they will shift their focus from the poorer states to the developed economies” were dismissed with scepticism.

That threat is now a reality. In the current period, energy and extraction companies have lodged a unprecedented number of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – state efforts to stop environmental catastrophe. Corporations have so far won vast sums via ISDS, of which oil majors have obtained $84bn. That represents the combined GDP