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How do you understand our political system operates? It could be similar to this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. That's it. However, that’s how it operated in the past. Not anymore.

The Emergence of Shadow Courts

In the modern era, foreign corporations, or the wealthy individuals who own them, can sue elected administrations for the laws they pass, at offshore tribunals composed of corporate lawyers. Such disputes take place in secret. In contrast to domestic courts, these bodies allow no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even companies operating from this country. The door is open solely for businesses based overseas.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it can award damages of hundreds of millions, potentially billions.

These awards constitute not real financial harm but funds the arbitrators decide the company could potentially have made. The administration could be forced to abandon its policy. It becomes deterred from passing future laws in that area, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Record numbers of disputes are being initiated, as companies take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the awards. The consequence? Sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the decisions taken by parliaments is that this clause has been inserted – without democratic mandate, and frequently under conditions of extreme secrecy – within international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that plans to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine could have zero effect on climate commitments. The new government subsequently revoked the licence the Tories had issued. Today, this legal outcome is under threat by an secret arbitration panel accountable to no one but the corporations filing the suit.

During August, a corporate entity whose beneficial owners reside in the offshore financial centre filed a lawsuit against the UK government. Last week a dispute settlement body in Washington DC was set up to hear it.

The claimant is suing the UK for the money it could have earned if the mine had received permission to go ahead. Citizens have little idea how much this might be. Which individual is acting on its behalf in opposition to the state? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a international entity challenges it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coalmine case was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case so far, but it is highly possible that he will utilise the tribunal to contest the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against another European state for this reason, seeking $16bn: equivalent to half of state's yearly budget. Among the counsel representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in utilising seized state funds as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

We were assured that these events were not possible. Previously, a senior politician, championing the largest and riskiest of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and there has not been a case in the past.” A consultant on this issue described activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “once firms begin to understand the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by general mockery.

That warning is now a reality. Recently, oil and gas and extraction companies have initiated a unprecedented number of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to halt global warming. Companies have to date won vast sums through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP