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Can you perceive our system of government operates? Perhaps something like this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills pass into law. Legislation are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. Not anymore.

The Rise of Shadow Courts

Today, overseas companies, and the wealthy individuals that control them, can sue nation states for the laws they pass, at private courts made up of corporate lawyers. These proceedings are conducted behind closed doors. Differing from national judiciaries, these panels grant no right of appeal or legal review. The general public are unable to file a case to them, just as our government, including companies headquartered in this country. The door is open only to businesses registered abroad.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it may order compensation of vast sums, running into billions.

This compensation represent not actual losses but money the arbitrators determine the company could potentially have made. The government may have to abandon its policy. It is discouraged from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being filed, as firms take cues from each other, and private equity finance suits for a share of a portion of the takings. The outcome? National sovereignty and democratic governance are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the decisions made by legislatures is that this provision has been written – absent public approval, and often in a climate of profound opacity – within trade treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, a conservation group secured a significant win at the High Court. The judge determined that proposals to excavate the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the consent the Tories had approved. Now, this legal outcome is under threat by an offshore tribunal answering to exclusively the corporations bringing the case.

In August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit against the UK government. Recently a tribunal in Washington DC was established to adjudicate on it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has no idea how much this sum represents. What legal team is representing it against the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a overseas corporation contests it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the Russian aggression. He has filed a claim against a small nation with similar intent, demanding $16bn: half that government’s yearly income. Included in the lawyers representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts believe that the EU’s delay in using frozen state funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that such things could not occur. In 2014, a senior politician, championing the most significant and hazardous of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” An adviser on this matter accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states had to worry about ISDS claims. Predictions that “as corporations start to realise the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were greeted by general mockery.

That prediction has now materialised. In the current period, oil and gas and mining firms have lodged a record number of cases against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to stop climate breakdown. Corporations have to date won $114bn through ISDS, of which oil majors have secured $84bn. That equates to the combined GDP