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How do you perceive our political system functions? It could be along the lines of this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation is maintained by the courts. End of story. Yet, that was how it once functioned. Those days are over.

The Rise of Shadow Courts

Today, foreign corporations, and the billionaires that control them, can sue nation states for the policies they pass, at offshore tribunals made up of business advocates. These proceedings are held behind closed doors. Differing from national judiciaries, these tribunals provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including companies based in this country. They are open exclusively to businesses registered abroad.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of vast sums, running into billions.

These sums are based not on actual losses but compensation the arbitrators conclude the company would perhaps have made. The government may have to rescind the measure. It will be hesitant to introducing similar legislation in that area, worried about being sued.

A Process Growing Exponentially

Unprecedented levels of disputes are being initiated, as firms observe each other, and hedge funds finance suits for a share of a portion of the takings. The consequence? Sovereignty and popular rule are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the rulings enacted by legislatures is that this provision has been written – absent public approval, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Specific Instance: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have had no impact on national carbon targets. The new government subsequently revoked the consent the previous administration had granted. Currently, this legal outcome could be compromised by an foreign court accountable to exclusively the companies bringing the case.

In August, a firm whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. The previous week a tribunal in Washington DC was convened to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to proceed. Citizens have no clear indication how much this might be. Who is serving as its counsel challenging the UK administration? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company contests it through an unaccountable arbitration panel, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are little of the case at present, but it seems likely that he may employ the tribunal to fight the sanctions the UK enacted against him subsequent to the war in Ukraine. He has initiated proceedings against Luxembourg on these grounds, claiming sixteen billion dollars: an amount representing half government’s yearly income. Included in the lawyers acting for him in that case? a prominent lawyer, married to the previous PM.

Legal experts contend that the EU’s delay in utilising seized oligarchs' funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Threats

Politicians promised that such things were not possible. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, stated: “We’ve signed trade deal upon trade deal and we have never seen a problem in the past.” An adviser on this issue accused critics of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms start to realise the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were greeted by scepticism.

That warning has now materialised. Recently, energy and extraction companies have initiated a unprecedented number of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to stop climate breakdown. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP