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Can you understand our political system operates? It could be similar to this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that used to be how it used to work. No longer.

The Emergence of Shadow Courts

In the modern era, international firms, along with the oligarchs behind them, are able to litigate against governments for the laws they pass, at private courts staffed by corporate lawyers. These proceedings take place behind closed doors. In contrast to domestic courts, these bodies allow no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies based in this country. They are open solely for entities operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

This compensation represent not tangible damages but funds the tribunal officials decide the company might otherwise have made. The government could be forced to drop the legislation. It is discouraged from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of legal actions are being brought, as firms take cues from each other, and private equity bankroll lawsuits for a share of a cut of the settlements. The result? Democratic sovereignty and democratic governance are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the rulings taken by legislatures is that this clause has been written – without public consent, and often in a climate of profound opacity – inside trade treaties.

A Real-World Example: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the High Court. The presiding officer determined that plans to open the first deep coalmine in the UK for three decades, in northwest England, were illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The incoming administration subsequently revoked the permission the previous administration had granted. Today, this success is under threat by an offshore tribunal answering to only the entities bringing the case.

During August, a company whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. Last week a dispute settlement body in Washington DC was established to adjudicate on it.

This firm is litigating against the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Who is representing it in opposition to the state? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the domestic court supports it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK levied against him following the Russian aggression. He has already initiated proceedings against a small nation on these grounds, demanding sixteen billion dollars: half that nation's yearly income. Part of the counsel on his side? the wife of a former prime minister, married to the former British prime minister.

Trade specialists believe that the EU’s hesitation in utilising seized state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine critically depends on.

Misleading Claims and Growing Risks

We were assured that these scenarios were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this issue accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “when companies start to realise the influence they now possess, they will turn their attention from the weak nations to the developed economies” were met with widespread derision.

That warning is now a reality. This year, energy and mining firms have filed a unprecedented number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – government attempts to prevent climate breakdown. Corporations have to date won vast sums by using ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP