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What is your perceive our political system operates? Perhaps something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. That's it. Yet, that used to be how it used to work. No longer.

The Rise of Shadow Courts

In the modern era, international firms, along with the oligarchs that control them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even enterprises based in this country. They are open only to corporations based overseas.

When a secret court rules that a law or policy could harm the corporation’s anticipated profits, it may order compensation of vast sums, even billions.

This compensation constitute not actual losses but funds the panel members decide the company would perhaps have made. The government could be forced to abandon its policy. It will be deterred from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of legal actions are being initiated, as firms observe each other, and investment funds fund legal actions in return for a cut of the settlements. The consequence? Sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the rulings taken by elected bodies is that this clause has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – within bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge determined that proposals to open the first deep coalmine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The incoming administration subsequently revoked the consent the former government had approved. Today, this victory could be compromised by an foreign court reporting to exclusively the corporations bringing the case.

During August, a firm whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was established to consider the case.

The company is suing the UK for the money it could have earned if the mine had been allowed to go ahead. We have little idea how much this could amount to. Which individual is acting on its behalf challenging the British government? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the high court upholds it, then a foreign company disputes it through an secretive private court, and a sitting MP works for its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case at present, but it is highly possible that he may employ the arbitration process to challenge the restrictions the UK levied against him after the war in Ukraine. He has previously filed a claim against a small nation for this reason, seeking a colossal sum: equivalent to half of state's annual revenue. Among the counsel representing him there? Cherie Blair, spouse of the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized state funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments could be blocking the funds Ukraine critically depends on.

Misleading Claims and Escalating Threats

We were assured that these events were not possible. In 2014, a senior politician, championing the most significant and hazardous of all such treaties, declared: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” A consultant on this issue accused critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies begin to understand the power they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning has now materialised. Recently, energy and extraction companies have lodged a historic level of cases against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to halt global warming. Corporations have so far won $114bn by using ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP