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How do you perceive our political system operates? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. The law is maintained by the courts. Simple as that. Yet, that used to be how it used to work. Not anymore.

The Advent of Shadow Courts

In the modern era, foreign corporations, and the oligarchs who own them, are able to litigate against nation states for the laws they pass, at private courts made up of corporate lawyers. Such disputes are conducted behind closed doors. Differing from national judiciaries, these bodies grant no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, including companies operating from this country. The door is open solely for entities operating from foreign soil.

When a secret court determines that a law or policy may compromise the corporation’s expected profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation are based not on tangible damages but money the arbitrators determine the company might otherwise have made. The state might be compelled to drop the legislation. It is deterred from passing future laws of a similar nature, for fear of facing litigation.

A Process Running Rampant

Unprecedented levels of legal actions are being initiated, as firms learn from each other, and investment funds bankroll lawsuits in exchange for a share of the takings. The consequence? National sovereignty and democracy are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the choices enacted by parliaments is that this clause has been incorporated – absent public approval, and typically amid an atmosphere of total confidentiality – within trade treaties.

A Specific Instance: The Cumbrian Coal Mine

A year ago, activists secured a significant win at the senior court. The justice determined that plans to open the first major coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the consent the former government had issued. Currently, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the companies petitioning it.

During August, a corporate entity whose final controllers are located in the tax haven lodged a claim versus the UK government. Last week a arbitration panel in the United States was set up to consider the case.

The claimant is litigating against the UK for the money it could have earned if the mine had been permitted to go ahead. We have little idea how much this sum represents. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company disputes it through an secretive arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

On the same day that the court on the coal mine dispute was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case to date, but it is highly possible that he may employ the arbitration process to fight the penalties the UK enacted against him following the Russian aggression. He has started suing another European state on these grounds, claiming a colossal sum: half that government’s yearly income. Among the counsel on his side? the wife of a former prime minister, married to the previous PM.

Trade specialists contend that the EU’s delay in using frozen Russian assets as security for its aid for Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that such things wouldn’t happen. Years ago, a government leader, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this topic labelled activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “once firms grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning has now materialised. Recently, fossil fuel and resource corporations have initiated a unprecedented number of suits against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to halt global warming. Corporations have thus far won $114bn via ISDS, of which oil majors have secured $84bn. That represents the combined GDP