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Can you understand our system of government functions? Maybe along the lines of this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. Yet, that used to be how it operated in the past. Those days are over.

The Rise of Shadow Courts

In the modern era, overseas companies, and the billionaires that control them, are able to litigate against nation states for the policies they pass, at private courts made up of corporate lawyers. Such disputes are held behind closed doors. In contrast to domestic courts, these panels provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses based in this country. They are open only to entities registered abroad.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it can award damages of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but money the tribunal officials conclude the company would perhaps have made. The state could be forced to rescind the measure. It will be deterred from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies learn from each other, and private equity fund legal actions in exchange for a portion of the awards. The outcome? National sovereignty and democratic governance are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices made by legislatures is that this clause has been incorporated – absent public approval, and often in conditions of profound opacity – within trade treaties.

A Specific Case: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The judge ruled that schemes to open the first major coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the consent the previous administration had granted. Currently, this success faces being overturned by an secret arbitration panel reporting to only the corporations petitioning it.

In August, a company whose ultimate owners are based in the offshore financial centre initiated proceedings against the UK government. Last week a dispute settlement body in Washington DC was set up to consider the case.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this sum represents. Which individual is acting on its behalf in opposition to the state? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot the MP. The state enacts a policy, the national judiciary validates it, then a overseas corporation challenges it through an unaccountable private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he may employ the arbitration process to contest the restrictions the UK levied against him following the Russian aggression. He has previously started suing a small nation for this reason, seeking sixteen billion dollars: equivalent to half of nation's annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its financial support package is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Mounting Costs

Politicians promised that such things wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all such treaties, told us: “We’ve signed trade deal upon trade deal and there has not been a problem in the past.” A consultant on this topic labelled campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “once firms grasp the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That prediction has come to pass. In the current period, energy and resource corporations have initiated a historic level of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – state efforts to halt climate breakdown. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP