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What is your understand our political system functions? Perhaps similar to this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills become law. The law is upheld by the courts. End of story. However, that used to be how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, and the wealthy individuals behind them, can sue governments for the policies they pass, at private courts composed of corporate lawyers. The cases are conducted in secret. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. You or I are unable to file a case to them, just as our government, including businesses operating from this country. The door is open solely for businesses based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it may order compensation of hundreds of millions, running into billions.

This compensation are based not on tangible damages but compensation the panel members decide the company might otherwise have made. The administration may have to abandon its policy. It is discouraged from passing future laws along the same lines, for fear of being sued.

A System Growing Exponentially

Historically high figures of cases are being filed, as corporations observe each other, and private equity fund legal actions in return for a cut of the settlements. The result? National sovereignty and democratic governance are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the choices enacted by elected bodies is that this clause has been incorporated – without public consent, and frequently under conditions of profound opacity – inside bilateral investment treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The justice found that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine could have no consequence on climate commitments. The new government subsequently revoked the permission the previous administration had issued. Currently, this legal outcome faces being overturned by an foreign court reporting to no one but the corporations filing the suit.

During August, a corporate entity whose final controllers are located in the tax haven lodged a claim challenging the UK government. Last week a dispute settlement body in Washington DC was set up to hear it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to go ahead. We have no idea how much this might be. Which individual is serving as its counsel in opposition to the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The state makes a decision, the high court supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the mining lawsuit was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case at present, but it appears probable that he will utilise the arbitration process to fight the penalties the UK imposed on him following the invasion of Ukraine. He has filed a claim against a small nation for this reason, seeking sixteen billion dollars: equivalent to half of state's yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s delay in using frozen Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine critically depends on.

Empty Promises and Escalating Threats

Politicians promised that these scenarios wouldn’t happen. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, stated: “Britain has agreed to trade agreement upon trade deal and there has not been a case in the past.” An adviser on this topic described campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by these lawsuits. Warnings that “as corporations grasp the influence they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction has come to pass. This year, oil and gas and extraction companies have initiated a unprecedented number of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Firms have thus far won $114bn through ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP