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How do you perceive our political system operates? It could be similar to this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. Simple as that. Well, that’s how it used to work. No longer.

The Advent of Shadow Courts

Today, foreign corporations, or the oligarchs who own them, can sue governments for the laws they pass, at offshore tribunals composed of corporate lawyers. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals grant no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, including enterprises operating from this country. Access is granted solely for entities based overseas.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it may order compensation of vast sums, running into billions.

This compensation represent not real financial harm but money the panel members decide the company might otherwise have made. The government could be forced to rescind the measure. It becomes discouraged from enacting future policies in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being brought, as firms take cues from each other, and hedge funds finance suits for a share of a portion of the settlements. The outcome? National sovereignty and democratic governance are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the choices enacted by elected bodies is that this clause has been inserted – without public consent, and typically amid an atmosphere of extreme secrecy – within bilateral investment treaties.

A Concrete Instance: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge determined that schemes to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have zero effect on climate commitments. The new government later cancelled the consent the former government had granted. Currently, this legal outcome is under threat by an secret arbitration panel reporting to no one but the entities bringing the case.

Last August, a corporate entity whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in the United States was convened to hear it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had received permission to proceed. We have no idea how much this sum represents. Who is serving as its counsel in opposition to the UK administration? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The government makes a decision, the national judiciary supports it, then a foreign company contests it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case to date, but it is highly possible that he may employ the tribunal to fight the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already initiated proceedings against Luxembourg on these grounds, claiming $16bn: half that state's yearly budget. Among the lawyers acting for him in that case? a prominent lawyer, wife of the previous PM.

Legal experts argue that the EU’s procrastination in utilising seized state funds as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine critically depends on.

Misleading Claims 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 such treaties, declared: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this topic accused critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “once firms grasp the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were met with scepticism.

That warning has come to pass. In the current period, fossil fuel and mining firms have filed a record number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – official measures to stop global warming. Firms have so far won $114bn by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP