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Can you reckon our system of government operates? It could be something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills become law. Legislation is maintained by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Rise of Shadow Tribunals

In the modern era, overseas companies, and the billionaires who own them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes take place behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions, even billions.

These awards constitute not actual losses but compensation the tribunal officials conclude the company would perhaps have made. The government could be forced to drop the legislation. It becomes discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of legal actions are being filed, as companies observe each other, and private equity finance suits in exchange for a portion of the takings. The outcome? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the choices made by parliaments is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice ruled that proposals to excavate the first major coal mine in the UK for a generation, in northwest England, were wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the licence the Tories had granted. Today, this victory is under threat by an foreign court answering to exclusively the entities filing the suit.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands initiated proceedings against the UK government. Last week a dispute settlement body in Washington DC was convened to hear it.

The company is litigating against the UK for the revenue it might have made if the mine had been permitted to go ahead. The public has no idea how much this sum represents. Who is representing it against the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The government enacts a policy, the national judiciary validates it, then a foreign company contests it through an undemocratic private court, and a elected official works for its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case to date, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK levied against him after the Russian aggression. He has initiated proceedings against another European state for this reason, demanding a colossal sum: equivalent to half of nation's yearly budget. Part of the legal team representing him there? a prominent lawyer, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over sovereign states might be preventing the finance Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that these events were not possible. Years ago, a government leader, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An adviser on this matter labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were met with general mockery.

That threat is now a reality. This year, oil and gas and extraction companies have filed a historic level of claims against nations both wealthy and developing, contesting – as in the case of the UK mine – official measures to stop climate breakdown. Firms have thus far won vast sums by using ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP