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How do you understand our political system operates? Maybe something like this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills pass into law. Legislation is upheld by the courts. That's it. However, that’s how it once functioned. No longer.

The Emergence of Shadow Courts

In the modern era, overseas companies, or the billionaires who own them, are able to litigate against governments for the laws they pass, at private courts staffed by corporate lawyers. These proceedings are conducted behind closed doors. Unlike our courts, these bodies allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses headquartered in this country. They are open only to businesses operating from foreign soil.

When a secret court determines that a legislative action may compromise the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

This compensation are based not on real financial harm but compensation the tribunal officials determine the company could potentially have made. The administration might be compelled to abandon its policy. It becomes deterred from enacting future policies in that area, due to the risk of being sued.

A Process Running Rampant

Record numbers of disputes are being initiated, as companies observe each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The result? National sovereignty and popular rule are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the decisions made by elected bodies is that this provision has been written – without democratic mandate, and often in an atmosphere of total confidentiality – within international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The justice determined that proposals to open the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government then withdrew the consent the Tories had approved. Today, this success is under threat by an foreign court reporting to no one but the companies filing the suit.

Last August, a corporate entity whose ultimate owners are based in the offshore financial centre lodged a claim challenging the UK government. Last week a dispute settlement body in Washington DC was set up to consider the case.

The company is suing the UK for the revenue it would have generated if the mine had been permitted to commence operations. We have little idea how much this sum represents. Who is acting on its behalf challenging the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a international entity contests it through an secretive private court, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case to date, but it is highly possible that he may employ the arbitration process to challenge the penalties the UK enacted against him after the war in Ukraine. He has already filed a claim against another European state with similar intent, demanding a colossal sum: half that state's yearly budget. Among the legal team on his side? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen Russian assets as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over elected governments may be obstructing the money Ukraine desperately needs.

Misleading Claims and Escalating Risks

The public was told that these events were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “The UK has signed trade deal upon trade deal and we have never seen a issue in the past.” An adviser on this issue accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about such legal actions. Warnings that “once firms grasp the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning is now a reality. Recently, energy and extraction companies have initiated a unprecedented number of cases against nations across the economic spectrum, contesting – similar to the Whitehaven project – state efforts to prevent climate breakdown. Companies have thus far won vast sums through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP