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Can you understand our system of government functions? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes is upheld by the courts. End of story. Yet, that’s how it operated in the past. No longer.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, along with the billionaires who own them, have the power to sue governments for the regulations they pass, at private courts composed of commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these bodies allow no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. The door is open exclusively to businesses operating from foreign soil.

If a tribunal determines that a legislative action could harm the corporation’s projected profits, it may order damages of vast sums, running into billions.

These awards represent not real financial harm but money the panel members conclude the company could potentially have made. The government may have to drop the legislation. It is hesitant to introducing similar legislation along the same lines, worried about being sued.

A System Growing Exponentially

Historically high figures of disputes are being filed, as firms observe each other, and private equity bankroll lawsuits for a share of a cut of the settlements. The result? Democratic sovereignty and popular rule are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the decisions taken by parliaments is that this provision has been incorporated – absent public approval, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The justice found that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine could have no impact on our carbon budgets. The incoming administration subsequently revoked the consent the previous administration had granted. Now, this victory is under threat by an secret arbitration panel answering to only the corporations bringing the case.

Last August, a firm whose ultimate owners are located in the tax haven filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. The public has little idea how much this could amount to. What legal team is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an undemocratic private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has already filed a claim against a small nation with similar intent, seeking $16bn: half that government’s yearly budget. Part of the counsel on his side? a prominent lawyer, wife of the ex-UK leader.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Misleading Claims and Mounting Costs

Politicians promised that these events could not occur. Previously, a government leader, championing the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” A consultant on this matter labelled campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear such legal actions. Warnings that “as corporations begin to understand the authority they’ve been granted, they will turn their attention from the weak nations to the strong ones” were dismissed with scepticism.

That threat has come to pass. This year, fossil fuel and resource corporations have initiated a record number of cases against nations rich and poor, challenging – similar to the Whitehaven project – state efforts to stop climate breakdown. Corporations have so far won vast sums through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP