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What is your understand our system of government operates? Maybe something like this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills become law. Legislation are enforced by the courts. End of story. Yet, that’s how it once functioned. Not anymore.

The Emergence of Shadow Courts

In the modern era, foreign corporations, or the billionaires behind them, can sue elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. The cases are conducted in secret. In contrast to domestic courts, these panels grant no opportunity to appeal or legal review. The general public cannot take a case to them, just as our government, or even enterprises headquartered in this country. The door is open exclusively to entities operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but money the tribunal officials decide the company could potentially have made. The state might be compelled to drop the legislation. It is deterred from introducing similar legislation in that area, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and private equity bankroll lawsuits for a share of a cut of the settlements. The result? Sovereignty and democratic governance are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the decisions enacted by elected bodies is that this clause has been written – without public consent, and frequently under an atmosphere of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the senior court. The justice determined that proposals to open the first major coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no impact on national carbon targets. The incoming administration later cancelled the permission the previous administration had approved. Currently, this legal outcome could be compromised by an secret arbitration panel accountable to only the corporations petitioning it.

During August, a company whose final controllers are located in the tax haven filed a lawsuit against the UK government. Last week a arbitration panel in Washington DC was set up to consider the case.

This firm is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. We have little idea how much this sum represents. What legal team is serving as its counsel challenging the state? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the court on the mining lawsuit was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the sanctions the UK imposed on him subsequent to the war in Ukraine. He has initiated proceedings against another European state on these grounds, seeking $16bn: an amount representing half nation's yearly income. Among the lawyers acting for him in that case? Cherie Blair, spouse of the former British prime minister.

Trade specialists contend that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments might be preventing the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

We were assured that these scenarios were not possible. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, stated: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” A consultant on this issue labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “when companies start to realise the influence they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That warning has now materialised. This year, oil and gas and mining firms have filed a record number of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP