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What is your perceive our system of government works? It could be something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. That's it. Well, that used to be how it used to work. Not anymore.

The Rise of Shadow Courts

In the modern era, overseas companies, and the wealthy individuals who own them, can sue governments for the regulations they pass, at private courts composed of commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these bodies grant no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even companies operating from this country. They are open exclusively to businesses registered abroad.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it may order compensation of vast sums, even billions.

This compensation are based not on actual losses but funds the arbitrators conclude the company might otherwise have made. The government could be forced to drop the legislation. It will be discouraged from enacting future policies in that area, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations observe each other, and private equity fund legal actions in return for a portion of the settlements. The result? National sovereignty and democratic governance are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the rulings taken by legislatures is that this provision has been incorporated – without public consent, and frequently under conditions of profound opacity – inside trade treaties.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no consequence on climate commitments. The new government later cancelled the licence the former government had granted. Now, this victory is under threat by an secret arbitration panel accountable to only the corporations filing the suit.

In August, a company whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was established to adjudicate on it.

The company is suing the UK for the money it might have made if the mine had been allowed to go ahead. We have no idea how much this sum represents. Which individual is serving as its counsel challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case at present, but it seems likely that he will utilise the tribunal to contest the restrictions the UK levied against him following the Russian aggression. He has previously initiated proceedings against another European state with similar intent, claiming sixteen billion dollars: an amount representing half state's annual revenue. Part of the lawyers on his side? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised oligarchs' funds as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over sovereign states might be preventing the funds Ukraine desperately needs.

Empty Promises and Mounting Threats

We were assured that such things were not possible. Previously, a government leader, advocating for the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An adviser on this matter labelled critics of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies begin to understand the power they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were dismissed with scepticism.

That prediction is now a reality. This year, oil and gas and extraction companies have initiated a unprecedented number of cases against nations both wealthy and developing, challenging – as in the case of the UK mine – state efforts to prevent global warming. Firms have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP