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What is your reckon our system of government functions? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is secured, the bills become law. Legislation are enforced by the courts. That's it. Yet, that was how it used to work. No longer.

The Advent of Shadow Courts

Today, foreign corporations, and the oligarchs behind them, can sue governments for the regulations they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are held away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even businesses based in this country. The door is open exclusively to businesses registered abroad.

When a secret court finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards are based not on actual losses but funds the tribunal officials decide the company would perhaps have made. The state may have to rescind the measure. It is discouraged from introducing similar legislation along the same lines, worried about facing litigation.

A Process Running Rampant

Record numbers of cases are being initiated, as firms take cues from each other, and hedge funds finance suits for a share of a cut of the settlements. The outcome? National sovereignty and democracy are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the rulings taken by legislatures is that this provision has been written – without public consent, and frequently under a climate of extreme secrecy – inside bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to dig the first deep coalmine in the UK for 30 years, in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine could have no impact on our carbon budgets. The incoming administration subsequently revoked the permission the former government had issued. Currently, this victory could be compromised by an offshore tribunal reporting to no one but the corporations bringing the case.

During August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. Last week a tribunal in the US capital was set up to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been allowed to go ahead. Citizens have no clear indication how much this sum represents. What legal team is representing it challenging the state? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary validates it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official works for its behalf.

A Sanctions Case

Concurrently that the tribunal on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK imposed on him after the invasion of Ukraine. He has previously started suing another European state for this reason, claiming $16bn: equivalent to half of state's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, wife of the previous PM.

Legal experts contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios could not occur. In 2014, a government leader, advocating for the most significant and hazardous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this issue labelled critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear ISDS claims. Warnings that “when companies grasp the influence they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning is now a reality. This year, fossil fuel and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, opposing – similar to the Whitehaven project – government attempts to prevent environmental catastrophe. Firms have thus far won $114bn through ISDS, of which oil majors have been awarded the majority. That represents the combined GDP