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Can you reckon our political system operates? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

Nowadays, overseas companies, or the oligarchs who own them, can sue nation states for the regulations they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are conducted behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. Access is granted only to corporations registered abroad.

When a secret court rules that a government measure could harm the corporation’s expected profits, it can award financial penalties of hundreds of millions, potentially billions.

These awards constitute not actual losses but money the tribunal officials decide the company would perhaps have made. The state may have to abandon its policy. It is hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being initiated, as corporations observe each other, and investment funds finance suits in exchange for a share of the takings. The consequence? Sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the decisions taken by elected bodies is that this stipulation has been written – without democratic mandate, and frequently under a climate of total confidentiality – inside bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the senior court. The judge ruled that plans to dig the first major coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on national carbon targets. The Labour government later cancelled the consent the former government had issued. Now, this success could be compromised by an foreign court accountable to exclusively the corporations bringing the case.

Last August, a corporate entity whose beneficial owners reside in the offshore financial centre lodged a claim against the UK government. Recently a tribunal in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to commence operations. We have no clear indication how much this sum represents. What legal team is acting on its behalf challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The state enacts a policy, the high court upholds it, then a overseas corporation contests it through an undemocratic arbitration panel, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case at present, but it seems likely that he may employ the tribunal to contest the penalties the UK imposed on him after the war in Ukraine. He has started suing a small nation on these grounds, demanding sixteen billion dollars: half that nation's annual revenue. Part of the counsel on his side? Cherie Blair, spouse of the former British prime minister.

International law scholars believe that the EU’s hesitation in leveraging immobilised state funds as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

Misleading Claims and Growing Risks

Politicians promised that such things could not occur. Years ago, a former prime minister, promoting the most significant and hazardous of all such treaties, told us: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this topic labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “when companies grasp the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning has come to pass. Recently, fossil fuel and mining firms have lodged a unprecedented number of suits against nations rich and poor, contesting – like the example of the UK mine – state efforts to halt global warming. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP