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How do you perceive our system of government operates? Maybe along the lines of this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. Simple as that. Yet, that was how it operated in the past. Not anymore.

The Emergence of Shadow Courts

In the modern era, foreign corporations, and the wealthy individuals who own them, can sue elected administrations for the regulations they pass, at private courts staffed by commercial attorneys. Such disputes are conducted in secret. In contrast to domestic courts, these bodies grant no opportunity to appeal or judicial review. You or I cannot take a case to them, and neither can our government, including businesses headquartered in this country. The door is open only to corporations based overseas.

Should an arbitration panel finds that a law or policy may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions, potentially billions.

This compensation constitute not tangible damages but money the tribunal officials decide the company would perhaps have made. The government may have to drop the legislation. It is hesitant to passing future laws in that area, worried about facing litigation.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and investment funds fund legal actions in return for a share of the takings. The result? National sovereignty and democracy are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the decisions made by parliaments is that this clause has been incorporated – absent public approval, and often in an atmosphere of profound opacity – within bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the senior court. The justice ruled that plans to open the first major coal mine in the UK for a generation, in northwest England, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have had no impact on national carbon targets. The Labour government subsequently revoked the licence the former government had approved. Now, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the corporations petitioning it.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in the United States was established to consider the case.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to go ahead. We have no clear indication how much this sum represents. Which individual is representing it in opposition to the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government enacts a policy, the national judiciary supports it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the court on the mining lawsuit was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it seems likely that he will utilise the ISDS mechanism to challenge the penalties the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, seeking sixteen billion dollars: equivalent to half of government’s yearly income. Part of the lawyers on his side? a prominent lawyer, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

False Assurances and Escalating Threats

We were assured that these scenarios were not possible. Years ago, a senior politician, advocating for the most significant and hazardous of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An expert on this issue accused campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear these lawsuits. Warnings that “once firms grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were met with general mockery.

That warning has come to pass. Recently, energy and extraction companies have initiated a historic level of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Companies have to date won $114bn through ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP