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Can you reckon our political system operates? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. However, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, or the wealthy individuals that control them, have the power to sue elected administrations for the regulations they pass, at private courts made up of commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these bodies grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. They are open solely for entities operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

These sums are based not on tangible damages but money the tribunal officials determine the company might otherwise have made. The state might be compelled to abandon its policy. It becomes deterred from passing future laws of a similar nature, due to the risk of being sued.

A Process Running Rampant

Record numbers of cases are being initiated, as firms take cues from each other, and private equity bankroll lawsuits in return for a share of the settlements. The consequence? National sovereignty and democratic governance are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the choices made by legislatures is that this stipulation has been incorporated – without public consent, and often in conditions of total confidentiality – into trade treaties.

A Specific Example: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the senior court. The justice determined that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government subsequently revoked the permission the Tories had issued. Today, this victory is under threat by an foreign court accountable to no one but the corporations petitioning it.

Last August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

The company is suing the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have little idea how much this might be. Which individual is representing it against the British government? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a foreign company contests it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know little of the case at present, but it is highly possible that he may employ the tribunal to challenge the sanctions the UK imposed on him following the invasion of Ukraine. He has previously initiated proceedings against another European state on these grounds, claiming sixteen billion dollars: half that government’s yearly budget. Part of the counsel on his side? Cherie Blair, wife of the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized oligarchs' funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that such things could not occur. Years ago, a senior politician, advocating for the most significant and hazardous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this issue accused activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the power they’ve been granted, they will shift their focus from the weak nations to the developed economies” were met with widespread derision.

That prediction is now a reality. In the current period, fossil fuel and mining firms have lodged a record number of claims against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to stop global warming. Corporations have so far won $114bn via ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP