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What is your understand our political system works? Maybe something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills become law. Statutes are enforced by the courts. End of story. Yet, that was how it operated in the past. Those days are over.

The Rise of Shadow Courts

Nowadays, overseas companies, and the billionaires that control them, are able to litigate against nation states for the policies they pass, at private courts composed of commercial attorneys. Such disputes take place away from public scrutiny. Unlike our courts, these bodies provide no right of appeal or legal review. You or I are barred from bringing a case to them, just as our government, including enterprises operating from this country. The door is open exclusively to businesses based overseas.

Should an arbitration panel determines that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions, potentially billions.

These sums are based not on tangible damages but compensation the arbitrators conclude the company could potentially have made. The government could be forced to rescind the measure. It becomes hesitant to passing future laws along the same lines, worried about being sued.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a portion of the takings. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the rulings taken by legislatures is that this provision has been written – without democratic mandate, and frequently under an atmosphere of extreme secrecy – within bilateral investment treaties.

A Real-World Example: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the high court. The judge ruled that plans to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on climate commitments. The Labour government then withdrew the permission the Tories had issued. Currently, this legal outcome faces being overturned by an secret arbitration panel accountable to exclusively the companies petitioning it.

Last August, a firm whose ultimate owners are located in the tax haven lodged a claim against the UK government. Recently a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is suing the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have no clear indication how much this could amount to. What legal team is serving as its counsel in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, that great patriot the MP. The state enacts a policy, the national judiciary supports it, then a foreign company disputes it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Case

Concurrently that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it appears probable that he’ll use the tribunal to contest the restrictions the UK enacted against him after the Russian aggression. He has started suing Luxembourg for this reason, claiming a colossal sum: half that government’s yearly income. Included in the legal team representing him there? a prominent lawyer, wife of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its financial support package arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that such things were not possible. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” An adviser on this issue described campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Warnings that “once firms start to realise the authority they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with widespread derision.

That warning has come to pass. In the current period, energy and mining firms have lodged a record number of cases against nations rich and poor, opposing – similar to the UK mine – state efforts to halt environmental catastrophe. Firms have thus far won vast sums by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP