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How do you understand our system of government works? It could be similar to this. We elect MPs. They legislate on bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. Simple as that. However, that’s how it once functioned. Not anymore.

The Emergence of Shadow Courts

Nowadays, foreign corporations, or the billionaires that control them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. These proceedings take place behind closed doors. Unlike our courts, these panels 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 enterprises based in this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court finds that a law or policy could harm the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

These sums are based not on tangible damages but money the arbitrators determine the company would perhaps have made. The administration could be forced to abandon its policy. It becomes hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as corporations observe each other, and investment funds finance suits in return for a cut of the settlements. The result? National sovereignty and democratic governance are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the rulings taken by parliaments is that this provision has been incorporated – without public consent, and typically amid conditions of total confidentiality – inside international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The judge found that plans to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government subsequently revoked the permission the former government had issued. Now, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the corporations petitioning it.

During August, a corporate entity whose final controllers are located in the tax haven initiated proceedings against the UK government. The previous week a tribunal in Washington DC was set up to adjudicate on it.

The company is suing the UK for the money it might have made if the mine had been allowed to commence operations. Citizens have no clear indication how much this might be. Which individual is serving as its counsel challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The state passes a law, the domestic court upholds it, then a overseas corporation contests it through an secretive arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the mining lawsuit was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it is highly possible that he will utilise the arbitration process to fight the restrictions the UK imposed on him subsequent to the Russian aggression. He has already filed a claim against a small nation with similar intent, seeking $16bn: half that state's annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

The public was told that such things could not occur. In 2014, a government leader, promoting the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade agreement upon trade deal and there has never been a case in the past.” An adviser on this issue accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Predictions that “as corporations start to realise the power bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were dismissed with scepticism.

That threat is now a reality. In the current period, energy and extraction companies have initiated a record number of claims against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP