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Can you understand our system of government functions? It could be something like this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. End of story. However, that was how it operated in the past. No longer.

The Advent of Shadow Courts

Nowadays, international firms, along with the wealthy individuals behind them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. The cases take place away from public scrutiny. Differing from national judiciaries, these panels provide no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, or even companies operating from this country. They are open exclusively to entities operating from foreign soil.

If a tribunal finds that a legislative action might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, even billions.

These awards constitute not real financial harm but compensation the tribunal officials determine the company could potentially have made. The government could be forced to abandon its policy. It is discouraged from passing future laws in that area, for fear of incurring a lawsuit.

A System Running Rampant

Record numbers of cases are being initiated, as corporations learn from each other, and private equity fund legal actions in return for a share of the takings. The consequence? National sovereignty and popular rule are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the rulings taken by parliaments is that this provision has been inserted – absent public approval, and frequently under an atmosphere of extreme secrecy – within bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the senior court. The judge ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no impact on climate commitments. The Labour government later cancelled the consent the former government had granted. Now, this legal outcome faces being overturned by an offshore tribunal reporting to only the entities filing the suit.

During August, a company whose final controllers reside in the offshore financial centre initiated proceedings challenging the UK government. Recently a dispute settlement body in Washington DC was set up to consider the case.

This firm is suing the UK for the profits it would have generated if the mine had received permission to proceed. The public has no idea how much this sum represents. Who is serving as its counsel challenging the state? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Case

Concurrently that the court on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are little of the case so far, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK enacted against him following the Russian aggression. He has previously started suing another European state with similar intent, claiming sixteen billion dollars: an amount representing half state's yearly budget. Among the lawyers representing him there? Cherie Blair, married to the previous PM.

Legal experts contend that the EU’s hesitation in utilising seized Russian assets as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Costs

The public was told that these events could not occur. Years ago, a government leader, promoting the largest and riskiest of all such treaties, told us: “We’ve signed trade deal upon trade deal and there has never been a case in the past.” An adviser on this topic labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Warnings that “once firms grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That threat has now materialised. In the current period, fossil fuel and extraction companies have initiated a record number of claims against nations across the economic spectrum, challenging – similar to the UK mine – government attempts to stop global warming. Firms have to date won $114bn via ISDS, of which energy giants have obtained the majority. That equates to the combined GDP