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What is your perceive our system of government operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Advent of Shadow Courts

In the modern era, overseas companies, along with the wealthy individuals behind them, can sue elected administrations for the policies they pass, at secret arbitration panels composed of business advocates. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even companies headquartered in this country. They are open only to businesses operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These sums represent not actual losses but funds the panel members conclude the company could potentially have made. The government could be forced to abandon its policy. It is deterred from introducing similar legislation along the same lines, due to the risk of facing litigation.

A System Growing Exponentially

Unprecedented levels of cases are being initiated, as companies observe each other, and hedge funds finance suits in exchange for a portion of the takings. The result? National sovereignty and democracy are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the decisions enacted by legislatures is that this provision has been inserted – without public consent, and frequently under conditions of profound opacity – inside international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The judge ruled that plans to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have no consequence on national carbon targets. The Labour government then withdrew the consent the Tories had issued. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations petitioning it.

During August, a corporate entity whose ultimate owners reside in the tax haven initiated proceedings versus the UK government. The previous week a dispute settlement body in the United States was set up to hear it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to go ahead. We have little idea how much this could amount to. Who is serving as its counsel against the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a overseas corporation disputes it through an secretive private court, and a member of our parliament acts on its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case so far, but it is highly possible that he may employ the arbitration process to challenge the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has already initiated proceedings against another European state on these grounds, demanding sixteen billion dollars: an amount representing half nation's annual revenue. Included in the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars believe that the EU’s delay in using frozen oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Costs

The public was told that these events could not occur. Previously, a government leader, advocating for the largest and riskiest of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” An adviser on this matter labelled activists of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by such legal actions. Predictions that “as corporations begin to understand the influence they now possess, they will shift their focus from the vulnerable countries to the developed economies” were greeted by widespread derision.

That threat is now a reality. This year, oil and gas and extraction companies have filed a historic level of suits against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to prevent climate breakdown. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP