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What is your perceive our political system operates? Perhaps something like this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. However, that was how it once functioned. Not anymore.

The Rise of Shadow Courts

Today, international firms, or the oligarchs behind them, can sue governments for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are conducted in secret. Unlike our courts, these tribunals grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted solely for entities based overseas.

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

These awards are based not on actual losses but funds the panel members determine the company could potentially have made. The government may have to abandon its policy. It will be deterred from passing future laws along the same lines, worried about being sued.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as companies learn from each other, and investment funds bankroll lawsuits in return for a share of the settlements. The consequence? Democratic sovereignty and democracy are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the choices made by legislatures is that this stipulation has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – inside international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The judge determined that schemes to open the first major coal mine in the UK for three decades, in Cumbria, were illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the permission the former government had granted. Currently, this legal outcome is under threat by an offshore tribunal reporting to only the corporations filing the suit.

Last August, a firm whose beneficial owners are located in the Cayman Islands initiated proceedings against the UK government. The previous week a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. Which individual is serving as its counsel against the UK administration? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The state enacts a policy, the domestic court validates it, then a foreign company contests it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case so far, but it seems likely that he’ll use the arbitration process to fight the penalties the UK enacted against him following the Russian aggression. He has previously filed a claim against another European state for this reason, claiming sixteen billion dollars: half that nation's yearly budget. Included in the legal team representing him there? the wife of a former prime minister, married to the ex-UK leader.

Legal experts argue that the EU’s procrastination in leveraging immobilised state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

We were assured that such things could not occur. Previously, a senior politician, promoting the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” A consultant on this matter accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries needed to fear these lawsuits. Predictions that “when companies grasp the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by widespread derision.

That warning has now materialised. In the current period, fossil fuel and resource corporations have initiated a historic level of suits against nations across the economic spectrum, contesting – similar to the UK mine – government attempts to prevent global warming. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP