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What is your understand our system of government works? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills become law. The law are enforced by the courts. That's it. However, that was how it once functioned. Not anymore.

The Advent of Shadow Courts

Today, foreign corporations, and the oligarchs who own them, have the power to sue nation states for the policies they pass, at private courts composed of commercial attorneys. The cases take place in secret. Differing from national judiciaries, these panels provide no avenue for appeal or oversight by judges. The general public cannot take a case to them, just as our government, including companies based in this country. Access is granted solely for corporations operating from foreign soil.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions, running into billions.

This compensation represent not actual losses but compensation the panel members conclude the company would perhaps have made. The state could be forced to drop the legislation. It will be discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Record numbers of disputes are being filed, as companies learn from each other, and private equity fund legal actions for a share of a share of the awards. The consequence? National sovereignty and democratic governance are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the choices made by parliaments is that this stipulation has been written – without democratic mandate, and frequently under conditions of profound opacity – inside trade treaties.

A Specific Instance: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the senior court. The judge determined that proposals to open the first major coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have no impact on national carbon targets. The new government subsequently revoked the consent the former government had approved. Currently, this legal outcome is under threat by an offshore tribunal reporting to only the entities petitioning it.

Last August, a company whose beneficial owners are based in the Cayman Islands lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was established to adjudicate on it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to proceed. We have little idea how much this sum represents. Which individual is serving as its counsel challenging the British government? A sitting MP, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a overseas corporation contests it through an secretive offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

Concurrently that the court on the mining lawsuit was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it appears probable that he’ll use the arbitration process to fight the penalties the UK enacted against him following the invasion of Ukraine. He has initiated proceedings against another European state for this reason, demanding sixteen billion dollars: half that government’s yearly budget. Included in the lawyers acting for him in that case? a prominent lawyer, wife of the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over elected governments might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Costs

The public was told 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 trade agreement upon trade deal and there has never been a issue in the past.” An expert on this issue accused activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were met with widespread derision.

That warning has now materialised. This year, fossil fuel and resource corporations have initiated a historic level of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to stop environmental catastrophe. Corporations have to date won $114bn via ISDS, of which energy giants have secured $84bn. That represents the combined GDP