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How do you understand our system of government operates? Perhaps something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills become law. Statutes are enforced by the courts. That's it. Well, that used to be how it operated in the past. No longer.

The Advent of Shadow Courts

Today, foreign corporations, along with the billionaires that control them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by business advocates. These proceedings are held in secret. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. The general public are unable to file a case to them, just as our government, or even businesses based in this country. They are open solely for corporations operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s expected profits, it may order damages of vast sums, even billions.

These awards constitute not tangible damages but funds the panel members determine the company might otherwise have made. The administration could be forced to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being brought, as corporations take cues from each other, and private equity finance suits in return for a cut of the settlements. The result? Democratic sovereignty and democracy are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the rulings enacted by legislatures is that this clause has been incorporated – absent public approval, and typically amid a climate of profound opacity – into trade treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, a conservation group secured a significant win at the High Court. The justice found that plans to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted 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 licence the Tories had granted. Today, this success is under threat by an secret arbitration panel accountable to exclusively the companies filing the suit.

Last August, a firm whose ultimate owners are based in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was established to consider the case.

The claimant is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. The public has little idea how much this might be. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the high court upholds it, then a foreign company disputes it through an undemocratic private court, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the tribunal on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows little of the case so far, but it is highly possible that he’ll use the tribunal to contest the sanctions the UK levied against him subsequent to the war in Ukraine. He has previously started suing Luxembourg for this reason, demanding a colossal sum: an amount representing half state's yearly income. Among the lawyers representing him there? Cherie Blair, wife of the previous PM.

Legal experts contend that the EU’s procrastination in utilising seized oligarchs' funds as security for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

Politicians promised that these scenarios were not possible. Previously, a government leader, promoting the largest and riskiest of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” An adviser on this matter labelled critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Predictions that “as corporations start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were met with widespread derision.

That warning has come to pass. Recently, energy and resource corporations have filed a record number of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – government attempts to prevent climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP