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What is your reckon our political system operates? Maybe along the lines of this. We elect MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law is upheld by the courts. Simple as that. Yet, that was how it operated in the past. Those days are over.

The Emergence of Shadow Courts

Nowadays, international firms, and the wealthy individuals behind them, can sue nation states for the laws they pass, at offshore tribunals composed of business advocates. Such disputes take place in secret. Unlike our courts, these panels grant no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses based in this country. Access is granted exclusively to businesses based overseas.

If a tribunal rules that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

This compensation constitute not tangible damages but funds the tribunal officials determine the company would perhaps have made. The state could be forced to abandon its policy. It will be discouraged from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as corporations take cues from each other, and hedge funds fund legal actions in exchange for a share of the awards. The result? Sovereignty and popular rule are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings made by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

A year ago, activists won a great victory at the high court. The justice ruled that plans to open the first major coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the previous government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The new government later cancelled the licence the previous administration had approved. Currently, this victory faces being overturned by an offshore tribunal reporting to only the corporations petitioning it.

In August, a firm whose final controllers reside in the tax haven lodged a claim challenging the UK government. Last week a dispute settlement body in the US capital was convened to adjudicate on it.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to go ahead. Citizens have little idea how much this might be. What legal team is representing it in opposition to the British government? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the domestic court validates it, then a international entity disputes it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coal mine dispute was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are little of the case to date, but it is highly possible that he will utilise the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already started suing Luxembourg for this reason, claiming sixteen billion dollars: half that state's yearly budget. Included in the legal team on his side? the wife of a former prime minister, wife of the previous PM.

Legal experts argue that the EU’s delay in leveraging immobilised oligarchs' funds as collateral for its aid for Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Mounting Threats

The public was told that these events wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this topic labelled critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear such legal actions. Warnings that “as corporations start to realise the power they now possess, they will turn their attention from the weak nations to the developed economies” were greeted by scepticism.

That prediction has come to pass. This year, fossil fuel and mining firms have filed a historic level of suits against nations across the economic spectrum, challenging – similar to the Whitehaven project – government attempts to prevent global warming. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP