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What is your understand our political system operates? It could be something like this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that used to be how it once functioned. Those days are over.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the wealthy individuals who own them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies provide no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, or even companies headquartered in this country. Access is granted solely for corporations registered abroad.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it can award financial penalties of vast sums, running into billions.

These awards represent not actual losses but funds the tribunal officials conclude the company would perhaps have made. The government may have to rescind the measure. It will be hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Historically high figures of legal actions are being filed, as firms observe each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The result? Sovereignty and democracy are turning into unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the decisions enacted by parliaments is that this clause has been incorporated – without democratic mandate, and often in a climate of extreme secrecy – into trade treaties.

A Real-World Instance: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the high court. The judge determined that proposals to open the first new deep coal mine in the UK for three decades, in northwest England, were wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The Labour government then withdrew the permission the former government had granted. Currently, this success could be compromised by an offshore tribunal answering to only the companies petitioning it.

During August, a company whose beneficial owners are based in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in the United States was established to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to commence operations. We have no clear indication how much this sum represents. Who is serving as its counsel in opposition to the UK administration? A sitting MP, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the national judiciary supports it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case at present, but it appears probable that he will utilise the tribunal to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has previously filed a claim against a small nation for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly income. Included in the lawyers on his side? Cherie Blair, wife of the ex-UK leader.

International law scholars contend that the EU’s hesitation in using frozen oligarchs' funds as security for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Threats

Politicians promised that such things wouldn’t happen. Years ago, a senior politician, promoting the largest and riskiest of all such treaties, told us: “The UK has signed trade deal after trade deal and there has not been a case in the past.” An adviser on this topic labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about such legal actions. Warnings that “once firms start to realise the power they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That warning is now a reality. This year, energy and mining firms have lodged a historic level of claims against nations rich and poor, challenging – like the example of the UK mine – government attempts to stop global warming. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That represents the combined GDP