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How do you understand our political system operates? Maybe along the lines of this. We elect MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that’s how it used to work. Not anymore.

The Rise of Shadow Courts

Today, overseas companies, along with the oligarchs that control them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by commercial attorneys. The cases take place in secret. Differing from national judiciaries, these bodies provide no opportunity to appeal or judicial review. You or I cannot take a case to them, nor can our government, or even enterprises headquartered in this country. The door is open only to corporations operating from foreign soil.

If a tribunal finds that a law or policy might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions, running into billions.

These awards represent not tangible damages but funds the tribunal officials determine the company would perhaps have made. The administration could be forced to rescind the measure. It will be discouraged from enacting future policies along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of cases are being brought, as companies learn from each other, and investment funds bankroll lawsuits in return for a share of the takings. The result? National sovereignty and democracy are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings taken by legislatures is that this stipulation has been inserted – without public consent, and typically amid an atmosphere of profound opacity – into trade treaties.

A Concrete Example: The Cumbrian Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The judge ruled that schemes to open the first new deep coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine would have had no consequence on our carbon budgets. The incoming administration later cancelled the permission the previous administration had granted. Now, this success is under threat by an foreign court accountable to exclusively the entities bringing the case.

In August, a corporate entity whose ultimate owners reside in the Cayman Islands lodged a claim against the UK government. The previous week a arbitration panel in Washington DC was established to hear it.

The company is litigating against the UK for the money it might have made if the mine had been allowed to proceed. Citizens have no clear indication how much this could amount to. Which individual is serving as its counsel challenging the state? An elected representative, and former attorney-general in the previous government, the noted patriot the MP. The administration makes a decision, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the court on the coal mine dispute was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case at present, but it appears probable that he’ll use the arbitration process to fight the penalties the UK levied against him after the Russian aggression. He has previously initiated proceedings against another European state on these grounds, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Part of the legal team representing him there? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its loan to Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over democratic administrations might be preventing the money Ukraine critically depends on.

False Assurances and Mounting Threats

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all these agreements, stated: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” An adviser on this matter accused activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “once firms grasp the authority bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were greeted by scepticism.

That warning is now a reality. This year, fossil fuel and resource corporations have filed a record number of claims against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have so far won $114bn by using ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP