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Can you perceive our political system operates? Perhaps something like this. The public votes for MPs. They legislate on bills. If a majority is secured, 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

Today, foreign corporations, along with the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals composed of business advocates. The cases take place behind closed doors. Unlike our courts, these tribunals provide no right of appeal or legal review. The general public cannot take a case to them, nor can our government, including companies based in this country. They are open solely for corporations registered abroad.

Should an arbitration panel finds that a law or policy could harm the corporation’s anticipated profits, it can award damages of vast sums, potentially billions.

These sums represent not actual losses but money the panel members conclude the company would perhaps have made. The government might be compelled to rescind the measure. It becomes deterred from introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms learn from each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The outcome? National sovereignty and democracy are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the choices enacted by legislatures is that this clause has been written – absent public approval, and typically amid conditions of total confidentiality – within trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The justice determined that proposals to open the first new deep coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on national carbon targets. The new government later cancelled the licence the former government had granted. Today, this victory is under threat by an secret arbitration panel answering to only the companies bringing the case.

Last August, a firm whose final controllers are located in the tax haven lodged a claim versus the UK government. The previous week a dispute settlement body in the United States was established to adjudicate on it.

The claimant is suing the UK for the profits it might have made if the mine had been allowed to go ahead. Citizens have no idea how much this could amount to. Which individual is serving as its counsel challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The administration makes a decision, the domestic court validates it, then a foreign company disputes it through an unaccountable offshore tribunal, and a elected official represents its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case at present, but it is highly possible that he may employ the ISDS mechanism to contest the penalties the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Among the counsel acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine urgently requires.

Empty Promises and Mounting Risks

Politicians promised that these scenarios were not possible. In 2014, a government leader, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An adviser on this issue accused campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “when companies grasp the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction is now a reality. Recently, fossil fuel and extraction companies have initiated a historic level of claims against nations both wealthy and developing, opposing – similar to the Whitehaven project – government attempts to prevent climate breakdown. Firms have so far won vast sums via ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP