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How do you reckon our political system functions? Maybe something like this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills pass into law. The law are enforced by the courts. End of story. Well, that’s how it operated in the past. No longer.

The Advent of Shadow Tribunals

Today, international firms, along with the billionaires behind them, can sue nation states for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases take place behind closed doors. Unlike our courts, these tribunals provide no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises headquartered in this country. Access is granted exclusively to businesses registered abroad.

Should an arbitration panel determines that a law or policy may compromise the corporation’s expected profits, it can award compensation of hundreds of millions, potentially billions.

These sums represent not tangible damages but money the panel members decide the company might otherwise have made. The administration could be forced to drop the legislation. It becomes hesitant to enacting future policies in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being filed, as companies observe each other, and investment funds finance suits for a share of a share of the settlements. The consequence? Democratic sovereignty and popular rule are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings taken by parliaments is that this clause has been incorporated – absent public approval, and often in an atmosphere of profound opacity – within international trade agreements.

A Concrete Example: The UK Coal Mine

Twelve months ago, activists secured a significant win at the high court. The judge ruled that plans to dig the first major coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration subsequently revoked the permission the previous administration had issued. Today, this victory is under threat by an secret arbitration panel accountable to exclusively the companies petitioning it.

Last August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit against the UK government. Recently a tribunal in Washington DC was set up to consider the case.

The company is suing the UK for the money it might have made if the mine had been allowed to commence operations. Citizens have no idea how much this might be. Which individual is serving as its counsel in opposition to the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot the MP. The administration makes a decision, the domestic court upholds it, then a overseas corporation contests it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Case

On the same day that the court on the coalmine case was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are little of the case at present, but it is highly possible that he will utilise the tribunal to fight the sanctions the UK enacted against him after the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, seeking a colossal sum: half that nation's annual revenue. Included in the counsel representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars believe that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over democratic administrations could be blocking the finance Ukraine urgently requires.

Empty Promises and Escalating Threats

The public was told that such things could not occur. Years ago, a government leader, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty upon trade deal and we have never seen a case in the past.” An expert on this topic described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “once firms grasp the authority they now possess, they will shift their focus from the vulnerable countries to the developed economies” were met with widespread derision.

That prediction has now materialised. Recently, oil and gas and extraction companies have lodged a record number of cases against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP