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What is your understand our system of government works? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Advent of Shadow Courts

Today, international firms, along with the oligarchs that control them, have the power to sue nation states for the laws they pass, at offshore tribunals composed of business advocates. The cases take place away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, including enterprises headquartered in this country. The door is open solely for entities based overseas.

When a secret court determines that a government measure might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions, even billions.

These sums represent not real financial harm but compensation the tribunal officials conclude the company might otherwise have made. The state may have to drop the legislation. It becomes hesitant to enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being brought, as firms take cues from each other, and private equity finance suits in exchange for a share of the takings. The outcome? National sovereignty and democracy are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the decisions taken by elected bodies is that this provision has been incorporated – without democratic mandate, and typically amid conditions of total confidentiality – within international trade agreements.

A Real-World Instance: The UK Coalmine

Twelve months ago, activists won a great victory at the senior court. The presiding officer determined that proposals to open the first major coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine could have zero effect on our carbon budgets. The Labour government then withdrew the permission the previous administration had approved. Today, this legal outcome faces being overturned by an offshore tribunal reporting to no one but the corporations petitioning it.

Last August, a company whose final controllers are based in the offshore financial centre filed a lawsuit versus the UK government. Last week a arbitration panel in the US capital was established to hear it.

The company is seeking compensation from the UK for the money it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this could amount to. Which individual is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the domestic court upholds it, then a overseas corporation contests it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coalmine case was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK imposed on him following the Russian aggression. He has started suing a small nation on these grounds, demanding $16bn: half that state's annual revenue. Among the legal team on his side? a prominent lawyer, married to the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized Russian assets as guarantee for its financial support package arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over sovereign states may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Costs

Politicians promised that these events could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, stated: “The UK has signed trade deal upon trade deal and we have never seen a issue in the past.” An expert on this issue labelled activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries needed to fear these lawsuits. Predictions that “when companies grasp the influence they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That threat has now materialised. In the current period, oil and gas and mining firms have initiated a record number of claims against nations rich and poor, challenging – like the example of the Whitehaven project – official measures to prevent environmental catastrophe. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP