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How do you perceive our political system operates? Maybe something like this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills pass into law. The law is upheld by the courts. That's it. Yet, that was how it once functioned. No longer.

The Rise of Shadow Courts

Nowadays, foreign corporations, and the wealthy individuals who own them, are able to litigate against nation states for the laws they pass, at private courts staffed by corporate lawyers. These proceedings are conducted in secret. In contrast to domestic courts, these panels provide no avenue for appeal or legal review. The general public are unable to file a case to them, just as our government, including enterprises based in this country. Access is granted only to corporations operating from foreign soil.

Should an arbitration panel finds that a government measure may compromise the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These awards are based not on real financial harm but compensation the tribunal officials conclude the company could potentially have made. The state may have to abandon its policy. It is deterred from passing future laws in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms observe each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The outcome? Sovereignty and democratic governance are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the rulings taken by elected bodies is that this provision has been written – without democratic mandate, and typically amid a climate of extreme secrecy – into trade treaties.

A Real-World Example: The Cumbrian Coalmine

Last year, activists secured a significant win at the high court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The incoming administration then withdrew the permission the previous administration had issued. Now, this success could be compromised by an foreign court accountable to only the entities bringing the case.

During August, a company whose final controllers reside in the Cayman Islands lodged a claim against the UK government. Recently a arbitration panel in the US capital was established to hear it.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to proceed. We have no clear indication how much this might be. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a foreign company contests it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the mining lawsuit was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case so far, but it seems likely that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him after the Russian aggression. He has already started suing Luxembourg for this reason, seeking $16bn: half that government’s yearly budget. Among the legal team representing him there? a prominent lawyer, wife of the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that these scenarios wouldn’t happen. Years ago, a former prime minister, championing the largest and riskiest of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this issue described critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “once firms start to realise the power bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were met with scepticism.

That threat is now a reality. This year, oil and gas and mining firms have lodged a historic level of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP