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Can you reckon our system of government functions? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes is maintained by the courts. End of story. Yet, that used to be how it once functioned. Not anymore.

The Advent of Shadow Courts

Nowadays, international firms, or the oligarchs that control them, can sue elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes take place in secret. Unlike our courts, these panels grant no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including companies operating from this country. They are open only to corporations registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards are based not on real financial harm but compensation the arbitrators decide the company could potentially have made. The state might be compelled to drop the legislation. It becomes discouraged from passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being initiated, as corporations learn from each other, and investment funds fund legal actions in return for a cut of the takings. The outcome? Democratic sovereignty and democracy are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the choices taken by parliaments is that this provision has been written – without democratic mandate, and typically amid conditions of extreme secrecy – into international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The justice found that plans to open the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the licence the previous administration had granted. Now, this victory could be compromised by an foreign court reporting to no one but the companies petitioning it.

During August, a firm whose beneficial owners are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was convened to consider the case.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to go ahead. The public has no idea how much this could amount to. What legal team is serving as its counsel against the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot the MP. The administration enacts a policy, the domestic court upholds it, then a international entity challenges it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coal mine dispute was appointed, we learned from a government response that the UK is also being sued 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 tribunal to fight the sanctions the UK enacted against him subsequent to the Russian aggression. He has already started suing Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of nation's yearly income. Included in the lawyers acting for him in that case? Cherie Blair, married to the previous PM.

International law scholars believe that the EU’s procrastination in using frozen state funds as security for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments might be preventing the money Ukraine critically depends on.

False Assurances and Growing Risks

Politicians promised that these scenarios wouldn’t happen. In 2014, a former prime minister, advocating for the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” A consultant on this issue described activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Warnings that “once firms grasp the authority they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were met with widespread derision.

That prediction has now materialised. Recently, oil and gas and mining firms have lodged a record number of cases against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have to date won vast sums via ISDS, of which oil majors have obtained the majority. That represents the combined GDP