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What is your perceive our political system functions? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Advent of Shadow Courts

Today, international firms, along with the oligarchs behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are held behind closed doors. In contrast to domestic courts, these tribunals allow no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even companies operating from this country. They are open solely for businesses operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant compensation of vast sums, even billions.

These sums are based not on actual losses but money the tribunal officials decide the company could potentially have made. The administration might be compelled to abandon its policy. It will be deterred from passing future laws along the same lines, worried about incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations observe each other, and private equity bankroll lawsuits in return for a portion of the awards. The result? National sovereignty and democracy are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the rulings taken by legislatures is that this stipulation has been inserted – without public consent, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Real-World Case: The Whitehaven Coal Mine

Twelve months ago, activists secured a significant win at the high court. The presiding officer determined that schemes to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the consent the Tories had issued. Today, this legal outcome is under threat by an secret arbitration panel reporting to only the companies petitioning it.

In August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. Last week a arbitration panel in the United States was established to consider the case.

The company is suing the UK for the revenue it could have earned if the mine had received permission to proceed. We have no idea how much this might be. What legal team is representing it against the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration makes a decision, the domestic court validates it, then a foreign company contests it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Case

Concurrently that the court on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know little of the case at present, but it is highly possible that he’ll use the ISDS mechanism to fight the sanctions the UK imposed on him after the invasion of Ukraine. He has filed a claim against another European state for this reason, demanding $16bn: an amount representing half government’s yearly budget. Part of the legal team on his side? a prominent lawyer, married to the former British prime minister.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine critically depends on.

Empty Promises and Escalating Risks

Politicians promised that such things could not occur. Previously, a senior politician, championing the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a issue in the past.” An adviser on this matter described critics of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “as corporations grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning has now materialised. Recently, oil and gas and extraction companies have lodged a unprecedented number of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP