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What is your perceive our system of government works? It could be something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. Well, that was how it once functioned. Those days are over.

The Emergence of Shadow Courts

Today, international firms, or the wealthy individuals who own them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are held away from public scrutiny. Unlike our courts, these tribunals provide no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. The door is open only to corporations based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

These awards are based not on actual losses but money the panel members conclude the company could potentially have made. The state may have to drop the legislation. It is discouraged from introducing similar legislation of a similar nature, due to the risk of being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being filed, as firms take cues from each other, and investment funds finance suits in return for a cut of the awards. The result? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the rulings enacted by parliaments is that this stipulation has been incorporated – without public consent, and often in a climate of profound opacity – inside bilateral investment treaties.

A Real-World Case: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer determined that proposals to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine could have zero effect on national carbon targets. The Labour government later cancelled the permission the former government had issued. Currently, this success could be compromised by an foreign court accountable to no one but the companies filing the suit.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was set up to consider the case.

This firm is seeking compensation from the UK for the money it might have made if the mine had received permission to proceed. The public has no idea how much this sum represents. Who is serving as its counsel against the UK administration? An elected representative, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a overseas corporation disputes it through an secretive private court, and a sitting MP works for its behalf.

The Russian Case

Simultaneously that the tribunal on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know nothing of the case so far, but it appears probable that he’ll use the tribunal to challenge the restrictions the UK imposed on him following the Russian aggression. He has already initiated proceedings against another European state with similar intent, demanding a colossal sum: equivalent to half of nation's yearly income. Included in the counsel representing him there? Cherie Blair, spouse of the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over elected governments could be blocking the funds Ukraine critically depends on.

Empty Promises and Escalating Costs

The public was told that these scenarios wouldn’t happen. Previously, a government leader, championing the most significant and hazardous of all these agreements, stated: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” An expert on this issue described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations needed to fear ISDS claims. Predictions that “when companies grasp the power bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were greeted by general mockery.

That threat has now materialised. In the current period, energy and mining firms have lodged a historic level of cases against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP