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Can you perceive our political system operates? Maybe similar to this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. End of story. Well, that used to be how it operated in the past. Not anymore.

The Rise of Shadow Courts

Today, foreign corporations, along with the oligarchs that control them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, including enterprises operating from this country. Access is granted solely for corporations registered abroad.

If a tribunal finds that a law or policy might diminish the corporation’s anticipated profits, it may order financial penalties of vast sums, potentially billions.

These sums constitute not real financial harm but compensation the tribunal officials determine the company could potentially have made. The government could be forced to abandon its policy. It is deterred from enacting future policies in that area, worried about incurring a lawsuit.

A Process Running Rampant

Historically high figures of legal actions are being initiated, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a cut of the awards. The result? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings taken by legislatures is that this clause has been incorporated – without public consent, and typically amid a climate of total confidentiality – inside trade treaties.

A Real-World Example: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer ruled that proposals to open the first deep coalmine in the UK for three decades, in northwest England, were illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have no impact on our carbon budgets. The new government subsequently revoked the permission the former government had granted. Now, this legal outcome could be compromised by an secret arbitration panel reporting to no one but the corporations filing the suit.

During August, a firm whose final controllers reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a dispute settlement body in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the revenue it might have made if the mine had been permitted to proceed. The public has no idea how much this sum represents. Which individual is representing it challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state passes a law, the high court supports it, then a international entity challenges it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK enacted against him following the Russian aggression. He has previously initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of nation's yearly budget. Part of the counsel on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists contend that the EU’s procrastination in utilising seized oligarchs' funds as security 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 bilateral investment treaty. This unprecedented, secretive influence over sovereign states might be preventing the funds Ukraine urgently requires.

False Assurances and Growing Costs

We were assured that these scenarios wouldn’t happen. Previously, a government leader, championing the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” An adviser on this matter described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms begin to understand the power they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat has now materialised. In the current period, oil and gas and extraction companies have initiated a historic level of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Firms have to date won vast sums by using ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP