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What is your reckon our political system works? Perhaps similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes is maintained by the courts. That's it. Well, that used to be how it used to work. Those days are over.

The Advent of Shadow Tribunals

In the modern era, foreign corporations, and the wealthy individuals that control them, are able to litigate against nation states for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes take place away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open only to businesses registered abroad.

When a secret court rules that a legislative action may compromise the corporation’s expected profits, it can award damages of hundreds of millions of pounds, even billions.

These awards represent not tangible damages but compensation the panel members determine the company would perhaps have made. The administration may have to abandon its policy. It is discouraged from passing future laws in that area, worried about incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as companies learn from each other, and private equity fund legal actions in exchange for a portion of the settlements. The consequence? National sovereignty and democracy are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings made by elected bodies is that this clause has been written – absent public approval, and frequently under conditions of profound opacity – into bilateral investment treaties.

A Real-World Example: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer determined that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The new government subsequently revoked the permission the former government had issued. Today, this victory is under threat by an secret arbitration panel accountable to exclusively the corporations bringing the case.

During August, a corporate entity whose ultimate owners reside in the tax haven initiated proceedings against the UK government. Recently a tribunal in the US capital was established to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to proceed. Citizens have no idea how much this could amount to. Who is serving as its counsel in opposition to the state? A sitting MP, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity contests it through an secretive arbitration panel, and a elected official works for its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coal mine dispute was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case at present, but it appears probable that he may employ the ISDS mechanism to fight the penalties the UK levied against him subsequent to the war in Ukraine. He has previously started suing a small nation on these grounds, demanding a colossal sum: half that government’s yearly budget. Part of the legal team on his side? Cherie Blair, spouse of the ex-UK leader.

Trade specialists argue that the EU’s delay in using frozen state funds as collateral for its financial support package is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

Empty Promises and Growing Threats

Politicians promised that these scenarios could not occur. Previously, a government leader, championing the largest and riskiest of all these agreements, declared: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this issue labelled critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Predictions that “once firms begin to understand the power bestowed upon them, they will turn their attention from the poorer states to the developed economies” were met with general mockery.

That warning has now materialised. This year, oil and gas and mining firms have filed a record number of cases against nations across the economic spectrum, contesting – as in the case of the UK mine – official measures to halt global warming. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP