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Can you perceive our political system operates? It could be something like this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Statutes are enforced by the courts. That's it. However, that’s how it operated in the past. No longer.

The Rise of Shadow Courts

In the modern era, foreign corporations, and the wealthy individuals behind them, can sue nation states for the laws they pass, at private courts made up of corporate lawyers. The cases take place behind closed doors. Differing from national judiciaries, these tribunals provide no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, including companies based in this country. The door is open exclusively to corporations based overseas.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it may order damages of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but compensation the arbitrators decide the company would perhaps have made. The government might be compelled to rescind the measure. It will be discouraged from enacting future policies in that area, worried about incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and hedge funds fund legal actions in return for a cut of the settlements. The consequence? Sovereignty and popular rule are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the choices taken by legislatures is that this clause has been inserted – absent public approval, and frequently under conditions of profound opacity – inside international trade agreements.

A Concrete Example: The Whitehaven Coalmine

A year ago, activists won a great victory at the senior court. The presiding officer ruled that schemes to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on national carbon targets. The new government subsequently revoked the licence the Tories had approved. Today, this success could be compromised by an secret arbitration panel accountable to no one but the corporations filing the suit.

Last August, a firm whose final controllers are located in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in the US capital was convened to adjudicate on it.

The company is suing the UK for the revenue it might have made if the mine had received permission to proceed. Citizens have little idea how much this might be. What legal team is representing it against the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a international entity contests it through an unaccountable arbitration panel, 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 government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK enacted against him subsequent to the Russian aggression. He has already started suing another European state for this reason, seeking sixteen billion dollars: half that nation's yearly budget. Part of the legal team acting for him in that case? a prominent lawyer, wife of the previous PM.

International law scholars argue that the EU’s hesitation in using frozen oligarchs' funds as guarantee 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 remarkable, unaccountable authority over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Mounting Risks

The public was told that such things wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a case in the past.” An adviser on this issue labelled campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “when companies start to realise the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were met with general mockery.

That threat is now a reality. In the current period, oil and gas and mining firms have filed a historic level of suits against nations rich and poor, challenging – like the example of the UK mine – government attempts to halt global warming. Companies have to date won $114bn by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP