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How do you reckon our political system functions? Maybe something like this. We elect MPs. They vote on bills. Should a majority is obtained, the bills pass into law. Statutes is maintained by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Rise of Shadow Courts

Nowadays, international firms, and the billionaires behind them, have the power to sue governments for the laws they pass, at offshore tribunals made up of commercial attorneys. The cases are held in secret. Unlike our courts, these bodies provide no opportunity to appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including companies based in this country. They are open only to corporations registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, even billions.

This compensation are based not on tangible damages but compensation the tribunal officials conclude the company could potentially have made. The state might be compelled to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being initiated, as corporations take cues from each other, and investment funds finance suits in return for a cut of the awards. The outcome? National sovereignty and democracy are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the choices enacted by parliaments is that this clause has been inserted – without democratic mandate, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The judge found that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, were illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government subsequently revoked the licence the Tories had issued. Currently, this success faces being overturned by an foreign court accountable to only the entities bringing the case.

In August, a corporate entity whose ultimate owners are based in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the US capital was convened to adjudicate on it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. The public has no clear indication how much this could amount to. Who is serving as its counsel in opposition to the UK administration? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was appointed, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case at present, but it appears probable that he may employ the arbitration process to challenge the penalties the UK levied against him subsequent to the war in Ukraine. He has filed a claim against another European state on these grounds, demanding a colossal sum: half that nation's annual revenue. Part of the counsel on his side? Cherie Blair, spouse of the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized state funds as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

Misleading Claims and Growing Costs

We were assured that such things were not possible. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, declared: “We’ve signed trade deal upon trade deal and we have never seen a issue in the past.” An expert on this topic labelled critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “once firms begin to understand the influence they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by scepticism.

That prediction is now a reality. This year, fossil fuel and mining firms have initiated a record number of claims against nations across the economic spectrum, opposing – as in the case of the UK mine – official measures to stop climate breakdown. Corporations have so far won $114bn by using ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP