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What is your perceive our political system functions? Perhaps similar to this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. Legislation are enforced by the courts. Simple as that. However, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Courts

In the modern era, overseas companies, or the oligarchs who own them, can sue governments for the regulations they pass, at private courts staffed by business advocates. Such disputes take place away from public scrutiny. In contrast to domestic courts, these bodies allow no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted only to businesses based overseas.

If a tribunal determines that a law or policy might diminish the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, running into billions.

These sums represent not tangible damages but money the arbitrators determine the company might otherwise have made. The state may have to drop the legislation. It becomes discouraged from passing future laws in that area, for fear of being sued.

A System Running Rampant

Unprecedented levels of legal actions are being brought, as companies observe each other, and private equity finance suits in exchange for a cut of the settlements. The consequence? Democratic sovereignty and democracy are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the rulings made by elected bodies is that this stipulation has been inserted – absent public approval, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on national carbon targets. The incoming administration then withdrew the licence the previous administration had issued. Now, this success is under threat by an foreign court accountable to only the entities bringing the case.

In August, a firm whose beneficial owners are located in the Cayman Islands filed a lawsuit versus the UK government. Last week a tribunal in the United States was convened to consider the case.

The claimant is litigating against the UK for the money it might have made if the mine had been allowed to go ahead. Citizens have no idea how much this might be. What legal team is serving as its counsel in opposition to the UK administration? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a foreign company contests it through an undemocratic private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it appears probable that he may employ the tribunal to contest the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has started suing a small nation for this reason, demanding a colossal sum: equivalent to half of state's annual revenue. Included in the legal team representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars argue that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments could be blocking the money Ukraine urgently requires.

Empty Promises and Mounting Threats

Politicians promised that these events wouldn’t happen. In 2014, a senior politician, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed trade deal upon trade deal and there has not been a case in the past.” An adviser on this topic described campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries had to worry about such legal actions. Warnings that “when companies grasp the power they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That warning has now materialised. This year, oil and gas and extraction companies have filed a record number of suits against nations across the economic spectrum, opposing – as in the case of the UK mine – official measures to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP