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How do you reckon our political system operates? It could be similar to this. We elect MPs. They vote on bills. When a majority is achieved, the bills pass into law. The law is upheld by the courts. Simple as that. Yet, that was how it once functioned. Not anymore.

The Advent of Shadow Tribunals

In the modern era, foreign corporations, or the wealthy individuals who own them, can sue governments for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are held away from public scrutiny. Unlike our courts, these bodies provide no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, including businesses based in this country. Access is granted exclusively to corporations registered abroad.

If a tribunal rules that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of vast sums, potentially billions.

These awards represent not actual losses but funds the tribunal officials determine the company could potentially have made. The administration may have to rescind the measure. It becomes hesitant to introducing similar legislation of a similar nature, for fear of being sued.

A System Running Rampant

Record numbers of cases are being initiated, as companies take cues from each other, and private equity finance suits in return for a cut of the takings. The outcome? Sovereignty and democratic governance are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings made by elected bodies is that this stipulation has been written – without public consent, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The justice determined that plans to dig the first deep coalmine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine could have no impact on national carbon targets. The incoming administration then withdrew the licence the former government had approved. Today, this success could be compromised by an foreign court accountable to no one but the companies filing the suit.

Last August, a company whose ultimate owners are based in the tax haven filed a lawsuit challenging the UK government. Recently a dispute settlement body in Washington DC was established to consider the case.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this might be. Which individual is acting on its behalf in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a overseas corporation contests it through an secretive private court, and a sitting MP acts on its behalf.

An Oligarch's Challenge

On the same day that the court on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case to date, but it appears probable that he may employ the tribunal to fight the penalties the UK imposed on him following the invasion of Ukraine. He has already initiated proceedings against another European state with similar intent, claiming sixteen billion dollars: equivalent to half of nation's yearly budget. Among the counsel representing him there? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Escalating Costs

We were assured that these scenarios wouldn’t happen. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade agreement upon trade deal and there has not been a issue in the past.” A consultant on this issue described critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms grasp the influence bestowed upon them, they will shift their focus from the poorer states to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. In the current period, oil and gas and mining firms have lodged a historic level of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have thus far won $114bn via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP