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What is your reckon our system of government works? It could be something like this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes are enforced by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Emergence of Shadow Courts

In the modern era, international firms, or the billionaires behind them, can sue elected administrations for the policies they pass, at secret arbitration panels composed of commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these panels allow no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises operating from this country. The door is open only to entities operating from foreign soil.

When a secret court rules that a government measure may compromise the corporation’s projected profits, it has the power to grant compensation of vast sums, running into billions.

This compensation represent not tangible damages but money the arbitrators conclude the company might otherwise have made. The administration may have to abandon its policy. It is hesitant to passing future laws along the same lines, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of disputes are being brought, as firms take cues from each other, and investment funds finance suits in return for a cut of the awards. The consequence? Sovereignty and popular rule are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the rulings enacted by elected bodies is that this stipulation has been written – absent public approval, and typically amid a climate of profound opacity – into international trade agreements.

A Real-World Example: The Whitehaven Coalmine

Twelve months ago, activists secured a significant win at the High Court. The judge found that schemes to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on our carbon budgets. The Labour government then withdrew the licence the previous administration had issued. Currently, this legal outcome could be compromised by an secret arbitration panel accountable to no one but the corporations petitioning it.

Last August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit versus the UK government. Recently a dispute settlement body in Washington DC was convened to consider the case.

This firm is litigating against the UK for the revenue it would have generated if the mine had been allowed to go ahead. We have little idea how much this could amount to. Who is acting on its behalf challenging the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The state enacts a policy, the high court supports it, then a overseas corporation disputes it through an undemocratic private court, and a sitting MP works for its behalf.

The Russian Case

Simultaneously that the court on the mining lawsuit was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case to date, but it appears probable that he may employ the tribunal to contest the sanctions the UK levied against him following the invasion of Ukraine. He has previously started suing a small nation on these grounds, claiming $16bn: an amount representing half nation's yearly income. Included in the counsel on his side? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations may be obstructing the money Ukraine urgently requires.

False Assurances and Growing Risks

The public was told that these scenarios could not occur. Previously, a senior politician, advocating for the most significant and hazardous of all these agreements, stated: “The UK has signed trade deal upon trade deal and there has not been a case in the past.” An expert on this matter described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “once firms start to realise the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That threat is now a reality. Recently, oil and gas and mining firms have filed a record number of suits against nations rich and poor, contesting – like the example of the Cumbrian coalmine – official measures to halt climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP