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How do you perceive our system of government functions? Maybe along the lines of this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Yet, that’s how it used to work. No longer.

The Emergence of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the wealthy individuals who own them, can sue nation states for the policies they pass, at private courts composed of corporate lawyers. The cases take place away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, including businesses operating from this country. They are open exclusively to entities based overseas.

When a secret court determines that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These sums are based not on actual losses but funds the tribunal officials decide the company could potentially have made. The administration might be compelled to rescind the measure. It is deterred from enacting future policies along the same lines, worried about incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as firms take cues from each other, and private equity bankroll lawsuits in return for a portion of the takings. The result? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices enacted by legislatures is that this provision has been written – without democratic mandate, and typically amid an atmosphere of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The UK Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The justice found that plans to open the first deep coalmine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration then withdrew the permission the previous administration had issued. Currently, this victory is under threat by an foreign court accountable to only the corporations filing the suit.

During August, a firm whose final controllers are based in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in the United States was established to adjudicate on it.

The company is litigating against the UK for the money it could have earned if the mine had received permission to proceed. The public has little idea how much this sum represents. What legal team is representing it in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, the noted patriot the MP. The government passes a law, the high court supports it, then a international entity disputes it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case to date, but it is highly possible that he’ll use the ISDS mechanism to challenge the restrictions the UK imposed on him following the Russian aggression. He has previously filed a claim against a small nation with similar intent, claiming a colossal sum: half that government’s annual revenue. Among the lawyers on his side? Cherie Blair, married to the ex-UK leader.

Legal experts argue that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over sovereign states could be blocking the funds Ukraine critically depends on.

Misleading Claims and Mounting Costs

Politicians promised that these scenarios wouldn’t happen. Years ago, a government leader, championing the biggest and most dangerous of all investment pacts, declared: “We’ve signed trade deal upon trade deal and there has never been a problem in the past.” A consultant on this topic described campaigners of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That threat has come to pass. This year, energy and extraction companies have initiated a record number of claims against nations both wealthy and developing, challenging – as in the case of the UK mine – official measures to halt environmental catastrophe. Corporations have so far won vast sums through ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP