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How do you understand our system of government operates? It could be along the lines of this. The public votes for MPs. They vote on bills. When a majority is secured, the bills become law. Statutes is maintained by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

In the modern era, overseas companies, and the oligarchs behind them, have the power to sue governments for the regulations they pass, at private courts staffed by corporate lawyers. Such disputes are conducted behind closed doors. Unlike our courts, these bodies provide no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted only to entities registered abroad.

When a secret court determines that a legislative action may compromise the corporation’s projected profits, it may order compensation of vast sums, running into billions.

This compensation represent not real financial harm but funds the panel members determine the company might otherwise have made. The administration could be forced to drop the legislation. It becomes discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A System Growing Exponentially

Unprecedented levels of disputes are being initiated, as firms take cues from each other, and private equity finance suits for a share of a cut of the awards. The result? Sovereignty and democracy are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings taken by parliaments is that this clause has been incorporated – without democratic mandate, and frequently under conditions of profound opacity – into international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the senior court. The judge determined that proposals to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine could have zero effect on our carbon budgets. The new government subsequently revoked the licence the previous administration had granted. Currently, this victory could be compromised by an secret arbitration panel accountable to only the corporations petitioning it.

During August, a corporate entity whose beneficial owners reside in the tax haven lodged a claim versus the UK government. Recently a dispute settlement body in the United States was established to adjudicate on it.

This firm is suing the UK for the money it would have generated if the mine had been permitted to commence operations. We have no idea how much this might be. Who is serving as its counsel against the British government? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The government passes a law, the high court upholds it, then a international entity contests it through an undemocratic private court, and a elected official works for its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case to date, but it seems likely that he may employ the ISDS mechanism to fight the sanctions the UK levied against him subsequent to the Russian aggression. He has initiated proceedings against a small nation with similar intent, claiming a colossal sum: equivalent to half of nation's yearly income. Part of the lawyers on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Threats

Politicians promised that such things wouldn’t happen. In 2014, a former prime minister, promoting the largest and riskiest of all investment pacts, stated: “We’ve signed trade agreement upon trade deal and we have never seen a problem in the past.” An expert on this matter accused campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the developed economies” were greeted by general mockery.

That prediction has now materialised. In the current period, fossil fuel and extraction companies have lodged a historic level of cases against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to halt climate breakdown. Corporations have thus far won $114bn via ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP