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How do you understand our political system operates? It could be something like this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. That's it. However, that used to be how it used to work. Those days are over.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the wealthy individuals behind them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted away from public scrutiny. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even companies headquartered in this country. Access is granted solely for corporations registered abroad.

Should an arbitration panel determines that a law or policy could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but compensation the panel members determine the company might otherwise have made. The state could be forced to drop the legislation. It becomes deterred from introducing similar legislation along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as companies observe each other, and investment funds fund legal actions for a share of a share of the takings. The consequence? National sovereignty and democracy are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions enacted by parliaments is that this stipulation has been inserted – absent public approval, and often in conditions of extreme secrecy – inside international trade agreements.

A Concrete Case: The UK Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The judge found that proposals to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had no impact on climate commitments. The new government later cancelled the permission the previous administration had approved. Today, this success faces being overturned by an foreign court accountable to no one but the entities bringing the case.

Last August, a company whose final controllers are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

The company is litigating against the UK for the money it could have earned if the mine had received permission to go ahead. We have no idea how much this could amount to. Who is acting on its behalf challenging the British government? A member of parliament, and ex-law officer in the previous government, that great patriot the MP. The state makes a decision, the high court upholds it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the tribunal on the coalmine case was appointed, we learned 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 so far, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK imposed on him after the Russian aggression. He has started suing a small nation on these grounds, claiming $16bn: an amount representing half nation's yearly budget. Part of the lawyers acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

We were assured that these events could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this issue accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “when companies grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were greeted by general mockery.

That threat is now a reality. Recently, fossil fuel and mining firms have filed a record number of claims against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – official measures to stop environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP