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What is your understand our system of government operates? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. However, that used to be how it used to work. Those days are over.

The Advent of Shadow Courts

In the modern era, foreign corporations, and the wealthy individuals that control them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels made up of corporate lawyers. Such disputes take place away from public scrutiny. In contrast to domestic courts, these bodies provide no opportunity to appeal or legal review. The general public cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted exclusively to entities registered abroad.

If a tribunal rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

This compensation represent not tangible damages but funds the tribunal officials conclude the company would perhaps have made. The administration may have to rescind the measure. It is hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits in return for a portion of the settlements. The result? National sovereignty and popular rule are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the choices enacted by legislatures is that this provision has been written – without public consent, and frequently under an atmosphere of total confidentiality – inside bilateral investment treaties.

A Real-World Example: The UK Coal Mine

Last year, activists secured a significant win at the High Court. The judge determined that plans to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The incoming administration then withdrew the permission the previous administration had issued. Today, this victory is under threat by an foreign court reporting to only the companies bringing the case.

During August, a firm whose beneficial owners reside in the tax haven lodged a claim challenging the UK government. Recently a dispute settlement body in the US capital was set up to adjudicate on it.

The company is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. Who is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an unaccountable private court, and a elected official works for its behalf.

A Sanctions Challenge

On the same day that the panel on the coalmine case was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case at present, but it seems likely that he’ll use the arbitration process to contest the penalties the UK levied against him after the Russian aggression. He has previously started suing another European state for this reason, seeking a colossal sum: half that government’s annual revenue. Part of the counsel representing him there? a prominent lawyer, wife of the previous PM.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as security for its financial support package is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine urgently requires.

Misleading Claims and Mounting Costs

The public was told that these scenarios could not occur. Previously, a government leader, championing the largest and riskiest of all these agreements, told us: “The UK has signed trade agreement after trade deal and there has not been a case in the past.” An expert on this matter accused critics of “alarmism … in reality, 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. Predictions that “once firms start to realise the power they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That threat has come to pass. This year, fossil fuel and extraction companies have initiated a unprecedented number of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – government attempts to halt climate breakdown. Firms have so far won $114bn by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP