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How do you perceive our political system operates? Maybe something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. The law is maintained by the courts. Simple as that. However, that’s how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

In the modern era, international firms, and the billionaires who own them, can sue governments for the policies they pass, at private courts composed of commercial attorneys. Such disputes are conducted behind closed doors. Unlike our courts, these bodies provide no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even companies headquartered in this country. The door is open solely for entities operating from foreign soil.

Should an arbitration panel determines that a legislative action might diminish the corporation’s projected profits, it has the power to grant financial penalties of vast sums, potentially billions.

This compensation are based not on real financial harm but compensation the arbitrators decide the company might otherwise have made. The administration may have to drop the legislation. It is discouraged from enacting future policies along the same lines, for fear of facing litigation.

A Mechanism Growing Exponentially

Record numbers of legal actions are being brought, as corporations take cues from each other, and hedge funds fund legal actions in return for a portion of the settlements. The outcome? Sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the decisions taken by parliaments is that this stipulation has been incorporated – absent public approval, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Example: The UK Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The justice ruled that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had no impact on national carbon targets. The new government later cancelled the licence the previous administration had granted. Today, this legal outcome could be compromised by an foreign court reporting to exclusively the corporations petitioning it.

In August, a corporate entity whose ultimate owners are based in the offshore financial centre filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. Which individual is serving as its counsel challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a foreign company disputes it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it appears probable that he will utilise the ISDS mechanism to fight the sanctions the UK enacted against him following the war in Ukraine. He has already started suing Luxembourg on these grounds, demanding sixteen billion dollars: an amount representing half state's yearly budget. Among the lawyers representing him there? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s hesitation in utilising seized Russian assets as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these scenarios were not possible. Years ago, a senior politician, advocating for the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement upon trade deal and there has not been a issue in the past.” An expert on this topic accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear these lawsuits. Warnings that “as corporations begin to understand the authority bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were met with widespread derision.

That warning has now materialised. In the current period, fossil fuel and resource corporations have filed a record number of claims against nations rich and poor, contesting – similar to the Whitehaven project – official measures to prevent environmental catastrophe. Firms have so far won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP