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How do you reckon our system of government functions? Maybe similar to this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills pass into law. Legislation are enforced by the courts. Simple as that. Yet, that’s how it once functioned. Those days are over.

The Rise of Shadow Courts

Nowadays, overseas companies, and the billionaires who own them, can sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. These proceedings are held in secret. Unlike our courts, these bodies allow no opportunity to appeal or judicial review. You or I are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted solely for corporations based overseas.

When a secret court finds that a government measure could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, potentially billions.

These sums are based not on real financial harm but funds the arbitrators conclude the company might otherwise have made. The state could be forced to drop the legislation. It will be discouraged from enacting future policies of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Historically high figures of cases are being filed, as corporations observe each other, and investment funds bankroll lawsuits for a share of a share of the takings. The consequence? Democratic sovereignty and popular rule are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the decisions made by elected bodies is that this stipulation has been written – absent public approval, and often in conditions of extreme secrecy – inside trade treaties.

A Concrete Case: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge found that schemes to dig the first deep coalmine in the UK for a generation, in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the licence the Tories had granted. Currently, this victory is under threat by an secret arbitration panel reporting to exclusively the companies bringing the case.

Last August, a corporate entity whose final controllers reside in the tax haven initiated proceedings versus the UK government. Recently a arbitration panel in the US capital was established to consider the case.

The claimant is litigating against the UK for the money it could have earned if the mine had received permission to go ahead. We have little idea how much this might be. Who is representing it in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The administration makes a decision, the national judiciary upholds it, then a overseas corporation challenges it through an unaccountable private court, and a elected official works for its behalf.

The Russian Case

Concurrently that the court on the coalmine case was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case at present, but it seems likely that he’ll use the tribunal to fight the restrictions the UK levied against him after the Russian aggression. He has previously started suing another European state with similar intent, claiming $16bn: half that nation's yearly income. Part of the lawyers on his side? the wife of a former prime minister, married to the previous PM.

Legal experts argue that the EU’s hesitation in using frozen state funds as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over elected governments could be blocking the finance Ukraine urgently requires.

False Assurances and Growing Threats

We were assured that these events were not possible. In 2014, a government leader, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a case in the past.” A consultant on this matter labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “when companies begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning has come to pass. This year, oil and gas and mining firms have lodged a historic level of claims against nations both wealthy and developing, contesting – like the example of the UK mine – official measures to stop global warming. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP