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How do you perceive our political system functions? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. The law are enforced by the courts. End of story. Well, that used to be how it operated in the past. No longer.

The Advent of Shadow Courts

Nowadays, foreign corporations, or the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these panels provide no opportunity to appeal or judicial review. You or I cannot take a case to them, just as our government, including businesses based in this country. The door is open exclusively to corporations operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s anticipated profits, it can award damages of hundreds of millions, running into billions.

These sums represent not tangible damages but money the tribunal officials decide the company would perhaps have made. The administration could be forced to rescind the measure. It is hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies learn from each other, and private equity bankroll lawsuits in exchange for a cut of the settlements. The outcome? National sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the decisions enacted by elected bodies is that this stipulation has been inserted – without democratic mandate, and often in an atmosphere of profound opacity – inside international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The justice found that plans to open the first new deep coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The new government subsequently revoked the licence the Tories had issued. Now, this legal outcome could be compromised by an secret arbitration panel reporting to no one but the companies petitioning it.

In August, a corporate entity whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was convened to adjudicate on it.

The claimant is suing the UK for the money it might have made if the mine had received permission to go ahead. The public has little idea how much this could amount to. What legal team is serving as its counsel in opposition to the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The government passes a law, the national judiciary supports it, then a international entity contests it through an secretive arbitration panel, and a elected official represents its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it is highly possible that he will utilise the tribunal to contest the sanctions the UK enacted against him following the Russian aggression. He has started suing another European state with similar intent, claiming a colossal sum: equivalent to half of state's yearly budget. Among the legal team on his side? a prominent lawyer, married to the previous PM.

Legal experts argue that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine desperately needs.

Misleading Claims and Mounting Threats

Politicians promised that such things were not possible. In 2014, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal upon trade deal and we have never seen a issue in the past.” A consultant on this matter described critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “when companies start to realise the influence they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That threat is now a reality. This year, energy and extraction companies have initiated a historic level of claims against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – official measures to stop environmental catastrophe. Firms have to date won vast sums through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP