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What is your reckon our system of government works? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Rise of Shadow Courts

In the modern era, international firms, along with the billionaires behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals composed of business advocates. These proceedings take place in secret. Unlike our courts, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including businesses headquartered in this country. The door is open solely for corporations registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions, even billions.

These sums are based not on tangible damages but funds the panel members conclude the company might otherwise have made. The administration could be forced to drop the legislation. It will be discouraged from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of disputes are being filed, as firms take cues from each other, and investment funds fund legal actions in return for a portion of the takings. The consequence? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the rulings enacted by parliaments is that this stipulation has been written – without democratic mandate, and often in conditions of total confidentiality – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the high court. The judge determined that schemes to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The Labour government subsequently revoked the permission the former government had granted. Now, this success faces being overturned by an foreign court reporting to only the corporations petitioning it.

Last August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings against the UK government. Recently a dispute settlement body in the United States was set up to consider the case.

The company is seeking compensation from the UK for the money it would have generated if the mine had been allowed to go ahead. We have no idea how much this sum represents. Which individual is serving as its counsel in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, that great patriot the MP. The government makes a decision, the national judiciary validates it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Case

On the same day that the court on the mining lawsuit was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case at present, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK levied against him after the invasion of Ukraine. He has started suing Luxembourg with similar intent, claiming a colossal sum: half that government’s yearly income. Part of the lawyers acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Trade specialists believe that the EU’s procrastination in leveraging immobilised state funds as security for its financial support package stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that such things were not possible. In 2014, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed trade deal upon trade deal and there has never been a problem in the past.” A consultant on this topic accused activists of “alarmism … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “when companies start to realise the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning has now materialised. This year, fossil fuel and resource corporations have initiated a record number of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – government attempts to prevent global warming. Companies have to date won vast sums through ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP