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How do you understand our system of government functions? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. End of story. Well, that used to be how it once functioned. Not anymore.

The Advent of Shadow Tribunals

Nowadays, overseas companies, or the oligarchs that control them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held away from public scrutiny. Unlike our courts, these tribunals grant no avenue for appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even enterprises operating from this country. They are open exclusively to corporations based overseas.

When a secret court finds that a legislative action may compromise the corporation’s anticipated profits, it can award financial penalties of vast sums, running into billions.

These awards represent not tangible damages but money the tribunal officials conclude the company could potentially have made. The government could be forced to rescind the measure. It is hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being brought, as firms learn from each other, and private equity finance suits in return for a share of the takings. The outcome? Sovereignty and democracy are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the rulings enacted by elected bodies is that this clause has been incorporated – without public consent, and frequently under a climate of profound opacity – into trade treaties.

A Specific Case: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the High Court. The judge ruled that plans to open the first deep coalmine in the UK for 30 years, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration later cancelled the consent the former government had issued. Currently, this victory faces being overturned by an secret arbitration panel reporting to no one but the entities bringing the case.

During August, a company whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. Recently a arbitration panel in the United States was set up to consider the case.

The claimant is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has little idea how much this might be. Which individual is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state passes a law, the high court upholds it, then a foreign company disputes it through an unaccountable arbitration panel, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know nothing of the case to date, but it seems likely that he’ll use the arbitration process to contest the penalties the UK imposed on him following the war in Ukraine. He has filed a claim against Luxembourg with similar intent, claiming $16bn: half that state's yearly budget. Among the legal team representing him there? Cherie Blair, spouse of the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized Russian assets as collateral for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine desperately needs.

Empty Promises and Mounting Threats

Politicians promised that such things could not occur. Years ago, a senior politician, championing the most significant and hazardous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this issue labelled activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “when companies begin to understand the influence they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were dismissed with scepticism.

That warning has come to pass. Recently, energy and extraction companies have initiated a record number of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – official measures to prevent climate breakdown. Firms have thus far won vast sums by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP