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How do you understand our political system functions? Maybe something like this. We elect MPs. They vote on bills. When a majority is obtained, the bills become law. Legislation is upheld by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Shadow Courts

Today, overseas companies, along with the wealthy individuals that control them, are able to litigate against elected administrations for the laws they pass, at private courts made up of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. The general public cannot take a case to them, just as our government, including enterprises operating from this country. The door is open exclusively to corporations operating from foreign soil.

Should an arbitration panel finds that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on real financial harm but compensation the arbitrators determine the company might otherwise have made. The administration may have to rescind the measure. It becomes deterred from passing future laws of a similar nature, for fear of being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as corporations learn from each other, and private equity bankroll lawsuits in exchange for a cut of the awards. The result? National sovereignty and popular rule are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the decisions made by legislatures is that this clause has been written – without public consent, and frequently under conditions of profound opacity – inside trade treaties.

A Concrete Instance: The UK Coalmine

Twelve months ago, activists secured a significant win at the high court. The presiding officer found that plans to dig the first major coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine could have zero effect on climate commitments. The incoming administration subsequently revoked the permission the former government had approved. Now, this success faces being overturned by an secret arbitration panel answering to only the companies bringing the case.

Last August, a company whose beneficial owners reside in the tax haven lodged a claim against the UK government. Recently a tribunal in the United States was established to consider the case.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to commence operations. We have no idea how much this might be. What legal team is representing it against the British government? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a overseas corporation contests it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was appointed, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he may employ the tribunal to challenge the restrictions the UK levied against him following the Russian aggression. He has previously filed a claim against Luxembourg with similar intent, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Part of the legal team acting for him in that case? a prominent lawyer, wife of the previous PM.

International law scholars believe that the EU’s hesitation in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine desperately needs.

False Assurances and Mounting Threats

We were assured that such things were not possible. Previously, a senior politician, advocating for the most significant and hazardous of all such treaties, declared: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” A consultant on this matter labelled critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by such legal actions. Warnings that “once firms start to realise the influence bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with general mockery.

That warning has come to pass. This year, fossil fuel and extraction companies have filed a historic level of suits against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – official measures to halt global warming. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured $84bn. That represents the combined GDP