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What is your understand our system of government works? Maybe something like 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. Well, that was how it once functioned. No longer.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the oligarchs who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these panels provide no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including companies operating from this country. They are open exclusively to entities registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, even billions.

These sums represent not actual losses but money the tribunal officials determine the company could potentially have made. The government may have to abandon its policy. It is hesitant to enacting future policies of a similar nature, for fear of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of cases are being initiated, as companies take cues from each other, and hedge funds fund legal actions in return for a share of the takings. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices taken by parliaments is that this stipulation has been incorporated – without democratic mandate, and often in a climate of extreme secrecy – inside international trade agreements.

A Real-World Case: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the high court. The justice determined that plans to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The new government then withdrew the licence the previous administration had issued. Today, this success could be compromised by an secret arbitration panel accountable to only the entities filing the suit.

Last August, a corporate entity whose ultimate owners are located in the tax haven initiated proceedings against the UK government. The previous week a arbitration panel in Washington DC was convened to consider the case.

The claimant is litigating against the UK for the money it would have generated if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. What legal team is representing it in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot the MP. The administration makes a decision, the domestic court upholds it, then a foreign company contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Challenge

On the same day that the court on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case to date, but it is highly possible that he may employ the ISDS mechanism to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against Luxembourg with similar intent, demanding $16bn: half that government’s annual revenue. Among the lawyers on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts contend that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that these scenarios could not occur. Previously, a senior politician, promoting the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” An expert on this topic labelled activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states had to worry about these lawsuits. Warnings that “as corporations grasp the authority they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were dismissed with widespread derision.

That threat is now a reality. This year, energy and mining firms have filed a historic level of claims against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – official measures to halt global warming. Firms have to date 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