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What is your perceive our system of government operates? Maybe similar to this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it once functioned. Not anymore.

The Emergence of Shadow Courts

In the modern era, foreign corporations, and the billionaires that control them, have the power to sue governments for the laws they pass, at offshore tribunals composed of business advocates. The cases are conducted behind closed doors. In contrast to domestic courts, these panels provide no opportunity to appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even enterprises operating from this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel finds that a legislative action may compromise the corporation’s anticipated profits, it can award compensation of vast sums, even billions.

These sums are based not on tangible damages but compensation the arbitrators determine the company could potentially have made. The administration could be forced to drop the legislation. It is deterred from introducing similar legislation in that area, for fear of being sued.

A System Growing Exponentially

Historically high figures of disputes are being filed, as companies learn from each other, and private equity finance suits for a share of a share of the settlements. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the rulings enacted by parliaments is that this provision has been inserted – absent public approval, and typically amid a climate of profound opacity – within international trade agreements.

A Specific Example: The Whitehaven Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The judge found that proposals to excavate the first major coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the licence the former government had granted. Now, this success could be compromised by an foreign court accountable to no one but the companies petitioning it.

In August, a company whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in the United States was established to consider the case.

The company is suing the UK for the money it could have earned if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. Who is acting on its behalf against the state? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a foreign company challenges it through an undemocratic private court, and a elected official works for its behalf.

A Sanctions Case

Concurrently that the panel on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he will utilise the tribunal to fight the penalties the UK enacted against him after the war in Ukraine. He has already filed a claim against another European state for this reason, claiming $16bn: half that government’s annual revenue. Included in the counsel acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as collateral for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the finance Ukraine critically depends on.

False Assurances and Escalating Risks

Politicians promised that such things wouldn’t happen. Years ago, a senior politician, advocating for the largest and riskiest of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” An adviser on this issue described campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “as corporations begin to understand the authority bestowed upon them, they will turn their attention from the poorer states to the strong ones” were dismissed with general mockery.

That threat is now a reality. In the current period, oil and gas and extraction companies have initiated a historic level of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – state efforts to stop environmental catastrophe. Firms have so far won vast sums through ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP