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Can you reckon our political system operates? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. However, that was how it operated in the past. No longer.

The Advent of Shadow Tribunals

Today, overseas companies, and the oligarchs that control them, can sue governments for the regulations they pass, at private courts made up of business advocates. The cases take place away from public scrutiny. Differing from national judiciaries, these tribunals grant no right of appeal or oversight by judges. The general public cannot take a case to them, nor can our government, including businesses based in this country. The door is open solely for corporations operating from foreign soil.

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

These awards represent not actual losses but money the panel members determine the company would perhaps have made. The state may have to rescind the measure. It becomes hesitant to introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of disputes are being filed, as corporations take cues from each other, and hedge funds fund legal actions in return for a cut of the takings. The outcome? National sovereignty and democracy are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices enacted by legislatures is that this clause has been incorporated – without public consent, and typically amid a climate of extreme secrecy – within bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the high court. The justice ruled that proposals to dig the first new deep coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no consequence on climate commitments. The Labour government later cancelled the licence the Tories had issued. Now, this success is under threat by an foreign court reporting to only the corporations petitioning it.

Last August, a firm whose beneficial owners are based in the tax haven lodged a claim versus the UK government. Recently a dispute settlement body in the United States was established to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been allowed to commence operations. The public has little idea how much this could amount to. Which individual is serving as its counsel against the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the high court supports it, then a international entity disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case to date, but it seems likely that he may employ the ISDS mechanism to challenge the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of nation's yearly income. Included in the lawyers on his side? the wife of a former prime minister, married to the former British prime minister.

International law scholars argue that the EU’s hesitation in leveraging immobilised state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that these events wouldn’t happen. Previously, a government leader, promoting the biggest and most dangerous of all investment pacts, stated: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this issue described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear ISDS claims. Warnings that “when companies start to realise the power bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were met with scepticism.

That threat has now materialised. Recently, energy and resource corporations have lodged a unprecedented number of claims against nations both wealthy and developing, contesting – like the example of the UK mine – state efforts to stop global warming. Corporations have to date won $114bn through ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP