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Can you perceive our political system works? Perhaps similar to this. We elect MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. The law is upheld by the courts. End of story. Well, that’s how it once functioned. Those days are over.

The Advent of Shadow Courts

In the modern era, international firms, along with the wealthy individuals who own them, can sue elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held away from public scrutiny. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. They are open solely for corporations registered abroad.

When a secret court rules that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

This compensation constitute not tangible damages but funds the arbitrators conclude the company would perhaps have made. The state might be compelled to rescind the measure. It becomes discouraged from enacting future policies in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of cases are being initiated, as corporations learn from each other, and hedge funds finance suits for a share of a cut of the takings. The result? National sovereignty and democracy are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings made by legislatures is that this clause has been written – without public consent, and often in an atmosphere of total confidentiality – within international trade agreements.

A Real-World Case: The UK Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The presiding officer determined that proposals to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on our carbon budgets. The incoming administration later cancelled the consent the previous administration had approved. Today, this victory could be compromised by an secret arbitration panel answering to only the companies filing the suit.

Last August, a firm whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. Recently a arbitration panel in the US capital was set up to adjudicate on it.

This firm is suing the UK for the revenue it could have earned if the mine had been allowed to go ahead. We have no clear indication how much this might be. What legal team is acting on its behalf challenging the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

On the same day that the court on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know little of the case to date, but it seems likely that he’ll use the arbitration process to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has previously filed a claim against another European state for this reason, seeking a colossal sum: half that government’s yearly income. Part of the counsel representing him there? Cherie Blair, spouse of the ex-UK leader.

International law scholars believe that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that such things wouldn’t happen. In 2014, a government leader, advocating for the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” A consultant on this topic accused campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That prediction has come to pass. In the current period, fossil fuel and resource corporations have initiated a record number of suits against nations across the economic spectrum, opposing – as in the case of the UK mine – state efforts to prevent global warming. Corporations have to date won vast sums through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP