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Can you reckon our system of government functions? Maybe something like this. We elect MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation are enforced by the courts. End of story. However, that used to be how it operated in the past. Not anymore.

The Emergence of Shadow Courts

In the modern era, foreign corporations, and the oligarchs who own them, can sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes take place behind closed doors. Unlike our courts, these panels grant no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, including businesses based in this country. Access is granted solely for corporations operating from foreign soil.

When a secret court rules that a law or policy could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not real financial harm but compensation the arbitrators conclude the company could potentially have made. The administration could be forced to abandon its policy. It will be discouraged from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of disputes are being filed, as corporations learn from each other, and private equity finance suits for a share of a portion of the takings. The consequence? National sovereignty and democratic governance are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the choices taken by legislatures is that this stipulation has been written – absent public approval, and typically amid a climate of profound opacity – within bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the high court. The judge found that schemes to open the first major coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government later cancelled the licence the Tories had granted. Currently, this legal outcome faces being overturned by an offshore tribunal reporting to only the entities filing the suit.

In August, a firm whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body 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 allowed to commence operations. We have little idea how much this could amount to. Who is serving as its counsel challenging the UK administration? A member of parliament, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The state makes a decision, the domestic court supports it, then a international entity contests it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

A Sanctions Case

On the same day that the court on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case so far, but it seems likely that he will utilise the tribunal to contest the sanctions the UK levied against him after the Russian aggression. He has previously started suing another European state for this reason, seeking a colossal sum: half that state's yearly budget. Included in the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

Legal experts argue that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations might be preventing the money Ukraine urgently requires.

Misleading Claims and Growing Threats

We were assured that these scenarios could not occur. Previously, a government leader, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and there has never been a problem in the past.” A consultant on this issue described campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by these lawsuits. Predictions that “once firms grasp the power they now possess, they will turn their attention from the vulnerable countries to the strong ones” were met with scepticism.

That prediction is now a reality. In the current period, energy and resource corporations have filed a record number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – government attempts to halt climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained $84bn. That represents the combined GDP