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Can you understand our system of government operates? Perhaps similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. That's it. Well, that’s how it operated in the past. Not anymore.

The Rise of Shadow Tribunals

Nowadays, overseas companies, or the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at private courts composed of commercial attorneys. These proceedings are conducted behind closed doors. Unlike our courts, these bodies provide no right of appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even companies based in this country. The door is open solely for businesses operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards are based not on actual losses but compensation the tribunal officials decide the company could potentially have made. The state could be forced to drop the legislation. It becomes discouraged from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being initiated, as corporations observe each other, and private equity bankroll lawsuits for a share of a cut of the settlements. The consequence? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the decisions made by elected bodies is that this clause has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – into international trade agreements.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to open the first major coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had no impact on our carbon budgets. The new government subsequently revoked the permission the previous administration had issued. Now, this success is under threat by an foreign court reporting to no one but the companies filing the suit.

During August, a firm whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. Recently a arbitration panel in Washington DC was set up to adjudicate on it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had received permission to go ahead. The public has no clear indication how much this might be. Which individual is serving as its counsel in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The government enacts a policy, the high court supports it, then a international entity disputes it through an secretive offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coal mine dispute was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case at present, but it seems likely that he may employ the tribunal to fight the sanctions the UK imposed on him subsequent to the Russian aggression. He has already filed a claim against another European state with similar intent, demanding sixteen billion dollars: an amount representing half government’s annual revenue. Among the legal team acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over democratic administrations might be preventing the funds Ukraine desperately needs.

False Assurances and Growing Costs

The public was told that such things wouldn’t happen. Years ago, a government leader, championing the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” A consultant on this topic described critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “when companies start to realise the influence they’ve been granted, they will turn their attention from the poorer states to the strong ones” were met with general mockery.

That prediction is now a reality. This year, fossil fuel and extraction companies have initiated a unprecedented number of suits against nations rich and poor, contesting – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have to date won $114bn by using ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP