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Can you understand our democratic process operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills become law. The law is upheld by the courts. End of story. Yet, that was how it once functioned. No longer.

The Rise of Shadow Courts

In the modern era, international firms, or the billionaires who own them, are able to litigate against governments for the laws they pass, at private courts made up of business advocates. The cases are conducted behind closed doors. Unlike our courts, these bodies allow no opportunity to appeal or legal review. You or I are unable to file a case to them, nor can our government, or even companies operating from this country. They are open only to entities registered abroad.

Should an arbitration panel rules that a law or policy may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but compensation the arbitrators determine the company could potentially have made. The administration may have to abandon its policy. It will be deterred from enacting future policies in that area, worried about facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being brought, as companies learn from each other, and investment funds fund legal actions in return for a cut of the settlements. The consequence? Sovereignty and democracy are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the decisions made by elected bodies is that this clause has been incorporated – without democratic mandate, and typically amid a climate of profound opacity – within international trade agreements.

A Real-World Instance: The Cumbrian Coalmine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge ruled that plans to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine would have no consequence on our carbon budgets. The Labour government later cancelled the consent the previous administration had granted. Today, this success could be compromised by an secret arbitration panel reporting to only the corporations filing the suit.

During August, a corporate entity whose ultimate owners are based in the Cayman Islands initiated proceedings versus the UK government. Last week a arbitration panel in Washington DC was established to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had been permitted to commence operations. We have no clear indication how much this might be. Who is serving as its counsel challenging the UK administration? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court supports it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the panel on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are scarce of the case to date, but it is highly possible that he will utilise the ISDS mechanism to challenge the penalties the UK levied against him after the Russian aggression. He has already started suing Luxembourg on these grounds, seeking a colossal sum: half that government’s annual revenue. Part of the counsel on his side? Cherie Blair, wife of the ex-UK leader.

Legal experts believe that the EU’s delay in using frozen state funds as security for its financial support package is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the money Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that these events could not occur. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, declared: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this issue described activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations had to worry about such legal actions. Cautionary notes that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the poorer states to the developed economies” were dismissed with widespread derision.

That threat is now a reality. In the current period, fossil fuel and resource corporations have filed a historic level of cases against nations rich and poor, opposing – like the example of the UK mine – official measures to stop climate breakdown. Corporations have thus far won vast sums through ISDS, of which energy giants have secured $84bn. That equates to the combined GDP