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Can you understand our system of government works? Maybe something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. That's it. However, that was how it operated in the past. Those days are over.

The Rise of Shadow Courts

In the modern era, overseas companies, and the oligarchs who own them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies headquartered in this country. Access is granted solely for corporations operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s expected profits, it may order compensation of vast sums, even billions.

These awards represent not actual losses but funds the panel members decide the company could potentially have made. The government may have to rescind the measure. It is discouraged from enacting future policies along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being filed, as firms take cues from each other, and hedge funds finance suits in return for a cut of the takings. The consequence? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the choices taken by parliaments is that this provision has been written – without democratic mandate, and often in an atmosphere of profound opacity – inside bilateral investment treaties.

A Concrete Instance: The UK Coalmine

A year ago, a conservation group won a great victory at the high court. The presiding officer ruled that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The new government then withdrew the consent the Tories had issued. Currently, this success faces being overturned by an foreign court answering to exclusively the corporations filing the suit.

Last August, a firm whose beneficial owners are located in the tax haven lodged a claim versus the UK government. Recently a tribunal in the US capital was set up to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had received permission to commence operations. Citizens have little idea how much this could amount to. Who is serving as its counsel in opposition to the state? A member of parliament, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a international entity contests it through an undemocratic private court, and a elected official represents its behalf.

A Sanctions Case

On the same day that the court on the coal mine dispute was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case to date, but it appears probable that he will utilise the ISDS mechanism to challenge the restrictions the UK enacted against him after the Russian aggression. He has already initiated proceedings against a small nation on these grounds, demanding $16bn: an amount representing half government’s yearly income. Part of the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over democratic administrations may be obstructing the funds Ukraine critically depends on.

Empty Promises and Mounting Costs

We were assured that such things were not possible. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this issue described critics of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations start to realise the power bestowed upon them, they will turn their attention from the weak nations to the developed economies” were greeted by general mockery.

That warning has come to pass. This year, energy and mining firms have initiated a unprecedented number of suits against nations rich and poor, opposing – similar to the UK mine – government attempts to prevent environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured the majority. That represents the combined GDP