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What is your reckon our system of government functions? It could be along the lines of this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. However, that’s how it used to work. Not anymore.

The Emergence of Shadow Courts

Nowadays, foreign corporations, or the oligarchs that control them, have the power to sue nation states for the laws they pass, at offshore tribunals composed of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, or even companies headquartered in this country. The door is open only to corporations based overseas.

When a secret court determines that a law or policy may compromise the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards represent not tangible damages but money the panel members conclude the company might otherwise have made. The state might be compelled to drop the legislation. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of being sued.

A System Running Rampant

Record numbers of disputes are being brought, as firms learn from each other, and hedge funds fund legal actions for a share of a share of the takings. The outcome? National sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the rulings enacted by parliaments is that this clause has been written – without public consent, and often in conditions of profound opacity – inside international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no consequence on national carbon targets. The Labour government subsequently revoked the consent the previous administration had approved. Currently, this success is under threat by an foreign court answering to only the companies filing the suit.

Last August, a firm whose ultimate owners reside in the Cayman Islands lodged a claim challenging the UK government. Recently a arbitration panel in Washington DC was set up to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. The public has no idea how much this sum represents. Who is acting on its behalf challenging the state? A sitting MP, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Case

On the same day that the panel on the coal mine dispute was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case to date, but it seems likely that he will utilise the ISDS mechanism to fight the restrictions the UK enacted against him following the invasion of Ukraine. He has already started suing another European state on these grounds, demanding a colossal sum: an amount representing half government’s yearly budget. Part of the legal team acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen state funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Threats

Politicians promised that such things were not possible. Years ago, a government leader, championing the largest and riskiest of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” A consultant on this issue labelled critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear ISDS claims. Warnings that “when companies grasp the authority bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were greeted by scepticism.

That warning has come to pass. Recently, fossil fuel and mining firms have filed a historic level of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to halt global warming. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP