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How do you perceive our system of government functions? Perhaps similar to this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Statutes are enforced by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Rise of Shadow Courts

Today, international firms, and the wealthy individuals that control them, can sue nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these tribunals grant no avenue for appeal or legal review. The general public are unable to file a case to them, just as our government, or even businesses based in this country. Access is granted solely for corporations registered abroad.

When a secret court finds that a law or policy could harm the corporation’s projected profits, it can award damages of vast sums, even billions.

This compensation constitute not real financial harm but money the arbitrators determine the company might otherwise have made. The state might be compelled to rescind the measure. It is hesitant to introducing similar legislation of a similar nature, for fear of being sued.

A System Running Rampant

Record numbers of cases are being brought, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a portion of the takings. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the decisions taken by parliaments is that this provision has been inserted – absent public approval, and frequently under a climate of profound opacity – inside international trade agreements.

A Concrete Case: The Cumbrian Coalmine

A year ago, activists secured a significant win at the High Court. The judge found that plans to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration then withdrew the consent the former government had approved. Today, this victory could be compromised by an secret arbitration panel reporting to only the companies petitioning it.

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

The company is litigating against the UK for the money it would have generated if the mine had been allowed to commence operations. Citizens have no idea how much this might be. Who is representing it challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government passes a law, the domestic court supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

A Sanctions Challenge

Concurrently that the court on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case at present, but it seems likely that he will utilise the tribunal to fight the sanctions the UK levied against him following the war in Ukraine. He has already started suing a small nation on these grounds, seeking a colossal sum: equivalent to half of nation's yearly budget. Included in the legal team on his side? a prominent lawyer, married to the former British prime minister.

Trade specialists argue that the EU’s delay in using frozen oligarchs' funds as collateral for its financial support package arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

Misleading Claims and Escalating Threats

Politicians promised that such things could not occur. Years ago, a senior politician, championing the largest and riskiest of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this issue labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “when companies grasp the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were met with scepticism.

That warning has come to pass. Recently, energy and mining firms have filed a record number of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent global warming. Corporations have so far won $114bn via ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP