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Can you reckon our system of government functions? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. The law is maintained by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Rise of Shadow Courts

Nowadays, international firms, along with the oligarchs who own them, can sue nation states for the regulations they pass, at offshore tribunals composed of business advocates. These proceedings take place behind closed doors. In contrast to domestic courts, these bodies provide no right of appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even companies operating from this country. Access is granted solely for corporations based overseas.

If a tribunal finds that a legislative action might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards constitute not actual losses but money the panel members conclude the company might otherwise have made. The administration might be compelled to drop the legislation. It will be deterred from passing future laws of a similar nature, for fear of facing litigation.

A System Growing Exponentially

Record numbers of disputes are being brought, as corporations observe each other, and private equity fund legal actions in return for a cut of the takings. The consequence? Democratic sovereignty and popular rule are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the rulings enacted by parliaments is that this clause has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer ruled that proposals to excavate the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have no impact on national carbon targets. The new government later cancelled the consent the Tories had approved. Today, this victory could be compromised by an foreign court answering to no one but the entities petitioning it.

In August, a firm whose ultimate owners are located in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the United States was established to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to commence operations. Citizens have no idea how much this sum represents. Who is acting on its behalf against the British government? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

On the same day that the tribunal on the coal mine dispute was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case to date, but it appears probable that he’ll use the ISDS mechanism to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against a small nation with similar intent, seeking $16bn: half that state's annual revenue. Part of the legal team on his side? the wife of a former prime minister, married to the ex-UK leader.

International law scholars contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations could be blocking the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

Politicians promised that such things wouldn’t happen. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, declared: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” A consultant on this matter described campaigners of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “when companies grasp the power bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That warning is now a reality. In the current period, energy and mining firms have initiated a historic level of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – state efforts to halt climate breakdown. Firms have thus far won vast sums via ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP