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How do you reckon our system of government operates? It could be similar to this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills pass into law. Statutes is upheld by the courts. Simple as that. Yet, that’s how it operated in the past. Those days are over.

The Rise of Shadow Courts

In the modern era, overseas companies, or the billionaires behind them, can sue elected administrations for the regulations they pass, at private courts composed of commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these tribunals allow no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. Access is granted solely for businesses operating from foreign soil.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation represent not tangible damages but funds the tribunal officials determine the company might otherwise have made. The state might be compelled to abandon its policy. It will be discouraged from enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as companies learn from each other, and private equity finance suits in exchange for a portion of the takings. The result? National sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the rulings made by legislatures is that this provision has been written – without democratic mandate, and typically amid conditions of total confidentiality – within bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The presiding officer found that schemes to open the first new deep coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on our carbon budgets. The Labour government subsequently revoked the licence the Tories had granted. Currently, this legal outcome could be compromised by an secret arbitration panel accountable to exclusively the companies petitioning it.

Last August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim against the UK government. Recently a tribunal in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the money it could have earned if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. Which individual is representing it in opposition to the UK administration? A member of parliament, and ex-law officer in the previous government, the noted patriot the MP. The state passes a law, the high court validates it, then a international entity contests it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it appears probable that he may employ the tribunal to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of nation's annual revenue. Part of the counsel on his side? Cherie Blair, spouse of the previous PM.

Trade specialists believe that the EU’s delay in utilising seized Russian assets as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Costs

The public was told that such things could not occur. In 2014, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” An expert on this issue labelled critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations grasp the authority they now possess, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with scepticism.

That warning has now materialised. This year, energy and resource corporations have filed a historic level of suits against nations across the economic spectrum, challenging – similar to the UK mine – government attempts to halt climate breakdown. Companies have so far won $114bn via ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP