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Can you perceive our political system operates? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. The law are enforced by the courts. End of story. Well, that was how it operated in the past. Not anymore.

The Emergence of Shadow Tribunals

Nowadays, foreign corporations, along with the oligarchs that control them, can sue elected administrations for the regulations they pass, at private courts composed of corporate lawyers. The cases are held in secret. Unlike our courts, these panels provide no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses operating from this country. They are open solely for businesses based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it may order financial penalties of vast sums, even billions.

These awards are based not on real financial harm but compensation the panel members conclude the company might otherwise have made. The government may have to drop the legislation. It is deterred from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of cases are being brought, as corporations learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the takings. The consequence? Sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the decisions made by elected bodies is that this clause has been written – without democratic mandate, and typically amid a climate of extreme secrecy – within international trade agreements.

A Real-World Example: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The justice ruled that schemes to excavate the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on national carbon targets. The Labour government later cancelled the consent the previous administration had granted. Now, this legal outcome could be compromised by an foreign court reporting to only the corporations bringing the case.

In August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had received permission to proceed. Citizens have no idea how much this might be. Which individual is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a foreign company disputes it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Challenge

On the same day that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case so far, but it seems likely that he will utilise the arbitration process to challenge the restrictions the UK enacted against him after the war in Ukraine. He has started suing a small nation on these grounds, claiming sixteen billion dollars: half that state's yearly income. Among the legal team on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine arises 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 democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Threats

We were assured that these events wouldn’t happen. Years ago, a senior politician, advocating for the most significant and hazardous of all these agreements, declared: “The UK has signed trade deal upon trade deal and there has not been a case in the past.” A consultant on this topic accused campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by these lawsuits. Predictions that “when companies start to realise the influence they’ve been granted, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That warning has now materialised. This year, oil and gas and mining firms have initiated a record number of claims against nations both wealthy and developing, contesting – similar to the UK mine – official measures to prevent global warming. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP