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How do you perceive our political system works? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes is maintained by the courts. Simple as that. Yet, that was how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, international firms, or the wealthy individuals behind them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place in secret. Differing from national judiciaries, these bodies grant no avenue for appeal or legal review. The general public are barred from bringing a case to them, just as our government, including enterprises based in this country. They are open exclusively to entities registered abroad.

If a tribunal determines that a government measure could harm the corporation’s expected profits, it may order damages of hundreds of millions, potentially billions.

These sums represent not tangible damages but funds the panel members decide the company would perhaps have made. The state could be forced to rescind the measure. It will be hesitant to enacting future policies in that area, worried about being sued.

A System Spiralling Out of Control

Record numbers of cases are being brought, as corporations learn from each other, and investment funds finance suits in return for a share of the takings. The outcome? Democratic sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the decisions made by parliaments is that this stipulation has been inserted – without democratic mandate, and often in a climate of profound opacity – inside bilateral investment treaties.

A Specific Example: The UK Coalmine

Last year, a conservation group secured a significant win at the senior court. The judge ruled that schemes to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have no impact on our carbon budgets. The Labour government later cancelled the consent the previous administration had granted. Now, this success faces being overturned by an secret arbitration panel reporting to only the companies petitioning it.

In August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was established to hear it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been permitted to proceed. We have no idea how much this might be. What legal team is acting on its behalf in opposition to the state? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the domestic court upholds it, then a international entity disputes it through an undemocratic private court, and a sitting MP represents its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it appears probable that he will utilise the arbitration process to fight the penalties the UK levied against him after the invasion of Ukraine. He has previously initiated proceedings against another European state on these grounds, claiming a colossal sum: equivalent to half of nation's annual revenue. Among the legal team acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that these scenarios could not occur. Years ago, a former prime minister, championing the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this matter described campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That prediction has come to pass. This year, energy and resource corporations have filed a record number of suits against nations rich and poor, challenging – like the example of the Whitehaven project – government attempts to prevent global warming. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP