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How do you understand our political system operates? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills become law. The law is upheld by the courts. End of story. Yet, that’s how it operated in the past. Those days are over.

The Advent of Shadow Courts

In the modern era, international firms, or the oligarchs who own them, have the power to sue nation states for the policies they pass, at private courts composed of corporate lawyers. Such disputes take place in secret. Unlike our courts, these panels provide no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies operating from this country. Access is granted solely for entities operating from foreign soil.

When a secret court rules that a government measure may compromise the corporation’s expected profits, it may order compensation of hundreds of millions, potentially billions.

These awards represent not real financial harm but compensation the tribunal officials conclude the company would perhaps have made. The administration could be forced to rescind the measure. It becomes discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of cases are being brought, as firms learn from each other, and investment funds fund legal actions in return for a share of the settlements. The result? Sovereignty and democracy are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the decisions enacted by elected bodies is that this clause has been inserted – without public consent, and often in a climate of extreme secrecy – inside international trade agreements.

A Real-World Case: The Whitehaven Coal Mine

A year ago, environmental campaigners won a great victory at the High Court. The justice determined that proposals to open the first deep coalmine in the UK for three decades, in northwest England, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no consequence on our carbon budgets. The new government later cancelled the permission the former government had issued. Currently, this victory is under threat by an secret arbitration panel answering to exclusively the companies petitioning it.

During August, a firm whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. Last week a tribunal in the United States was set up to consider the case.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. We have no idea how much this might be. What legal team is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a international entity challenges it through an secretive private court, and a member of our parliament acts on its behalf.

A Sanctions Case

On the same day that the panel on the coalmine case was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it appears probable that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against a small nation on these grounds, claiming $16bn: an amount representing half nation's yearly budget. Included in the counsel representing him there? a prominent lawyer, wife of the ex-UK leader.

Trade specialists argue that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over democratic administrations may be obstructing the money Ukraine urgently requires.

Empty Promises and Escalating Costs

Politicians promised that these events were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” A consultant on this matter described campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the developed economies” were dismissed with scepticism.

That warning has now materialised. This year, oil and gas and resource corporations have lodged a historic level of suits against nations rich and poor, contesting – similar to the UK mine – official measures to stop environmental catastrophe. Firms have to date won vast sums by using ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP