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Can you reckon our political system works? Maybe something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills pass into law. The law is maintained by the courts. Simple as that. However, that used to be how it operated in the past. Not anymore.

The Advent of Shadow Courts

In the modern era, foreign corporations, along with the oligarchs behind them, are able to litigate against governments for the laws they pass, at offshore tribunals made up of corporate lawyers. These proceedings are conducted in secret. Unlike our courts, these bodies grant no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, including enterprises headquartered in this country. The door is open exclusively to businesses registered abroad.

When a secret court determines that a government measure could harm the corporation’s projected profits, it has the power to grant financial penalties of vast sums, even billions.

These sums are based not on actual losses but funds the tribunal officials conclude the company could potentially have made. The administration may have to rescind the measure. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being brought, as companies learn from each other, and private equity bankroll lawsuits in return for a portion of the takings. The outcome? Sovereignty and popular rule are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the choices made by legislatures is that this provision has been inserted – without democratic mandate, and frequently under conditions of extreme secrecy – within bilateral investment treaties.

A Specific Case: The UK Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the high court. The judge found that proposals to open the first new deep coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration subsequently revoked the licence the previous administration had granted. Today, this legal outcome is under threat by an secret arbitration panel reporting to only the entities petitioning it.

During August, a company whose beneficial owners are based in the offshore financial centre lodged a claim versus the UK government. Last week a arbitration panel in the US capital was convened 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. We have little idea how much this might be. Which individual is serving as its counsel challenging the UK administration? An elected representative, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the domestic court validates it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the court on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case at present, but it seems likely that he may employ the arbitration process to challenge the sanctions the UK levied against him after the Russian aggression. He has already initiated proceedings against a small nation on these grounds, demanding $16bn: equivalent to half of state's yearly income. Part of the counsel representing him there? a prominent lawyer, married to the previous PM.

Legal experts argue that the EU’s delay in utilising seized Russian assets as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over sovereign states may be obstructing the finance Ukraine critically depends on.

False Assurances and Mounting Risks

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, championing the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An adviser on this matter accused activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear such legal actions. Warnings that “once firms grasp the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That warning is now a reality. This year, energy and extraction companies have lodged a historic level of suits against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have to date won $114bn by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP