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What is your understand our political system works? It could be something like this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Emergence of Shadow Courts

Today, overseas companies, or the billionaires who own them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. The cases are conducted in secret. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even businesses operating from this country. They are open exclusively to businesses registered abroad.

Should an arbitration panel finds that a law or policy could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions, even billions.

This compensation constitute not real financial harm but funds the arbitrators determine the company could potentially have made. The government might be compelled to rescind the measure. It is deterred from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being brought, as corporations take cues from each other, and private equity fund legal actions for a share of a portion of the takings. The outcome? Sovereignty and democracy are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the decisions made by legislatures is that this stipulation has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – within international trade agreements.

A Real-World Example: The Whitehaven Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge determined that proposals to open the first deep coalmine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The Labour government subsequently revoked the consent the previous administration had issued. Today, this success could be compromised by an secret arbitration panel answering to exclusively the companies petitioning it.

In August, a firm whose beneficial owners reside in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. We have no clear indication how much this might be. What legal team is serving as its counsel in opposition to the state? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the national judiciary supports it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Case

On the same day that the court on the mining lawsuit was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it seems likely that he may employ the ISDS mechanism to fight the sanctions the UK levied against him following the Russian aggression. He has already filed a claim against Luxembourg with similar intent, seeking $16bn: an amount representing half government’s yearly income. Part of the lawyers acting for him in that case? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised state funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over elected governments could be blocking the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these scenarios could not occur. In 2014, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this issue accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear such legal actions. Predictions that “when companies start to realise the authority they’ve been granted, they will turn their attention from the poorer states to the strong ones” were greeted by widespread derision.

That prediction has come to pass. In the current period, fossil fuel and resource corporations have initiated a historic level of suits against nations across the economic spectrum, opposing – like the example of the Whitehaven project – state efforts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP