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What is your perceive our political system functions? It could be similar to this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. End of story. Well, that’s how it operated in the past. Not anymore.

The Rise of Shadow Courts

In the modern era, international firms, or the wealthy individuals who own them, are able to litigate against nation states for the policies they pass, at private courts composed of business advocates. The cases are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises operating from this country. They are open solely for entities based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s expected profits, it may order financial penalties of vast sums, running into billions.

These awards are based not on real financial harm but compensation the panel members determine the company could potentially have made. The state might be compelled to abandon its policy. It will be discouraged from introducing similar legislation in that area, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as corporations take cues from each other, and investment funds bankroll lawsuits in return for a cut of the takings. The result? Democratic sovereignty and popular rule are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the rulings made by parliaments is that this clause has been incorporated – without public consent, and often in an atmosphere of total confidentiality – within bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The justice ruled that plans to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had zero effect on national carbon targets. The Labour government subsequently revoked the permission the former government had approved. Currently, this success could be compromised by an secret arbitration panel accountable to only the entities filing the suit.

In August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was set up to consider the case.

The claimant is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. We have no clear indication how much this might be. What legal team is acting on its behalf in opposition to the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The administration passes a law, the high court upholds it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the court on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know nothing of the case at present, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already started suing Luxembourg with similar intent, seeking $16bn: equivalent to half of state's yearly income. Among the counsel representing him there? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s delay in using frozen oligarchs' funds as security for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over democratic administrations might be preventing the finance Ukraine urgently requires.

False Assurances and Escalating Costs

Politicians promised that these events could not occur. In 2014, a former prime minister, championing the largest and riskiest of all investment pacts, told us: “The UK has signed trade deal upon trade deal and there has not been a problem in the past.” A consultant on this topic labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations should be concerned by ISDS claims. Predictions that “when companies begin to understand the power bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That threat is now a reality. This year, oil and gas and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, opposing – as in the case of the UK mine – state efforts to stop global warming. Firms have thus far won $114bn via ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP