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How do you perceive our political system functions? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. That's it. However, that’s how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

Today, overseas companies, or the oligarchs who own them, are able to litigate against nation states for the policies they pass, at private courts staffed by business advocates. The cases take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including businesses operating from this country. They are open solely for entities registered abroad.

When a secret court rules that a law or policy could harm the corporation’s expected profits, it has the power to grant compensation of vast sums, running into billions.

These sums are based not on actual losses but money the arbitrators conclude the company could potentially have made. The government could be forced to drop the legislation. It is hesitant to passing future laws of a similar nature, for fear of being sued.

A Process Growing Exponentially

Unprecedented levels of legal actions are being initiated, as firms observe each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The outcome? National sovereignty and democracy are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the rulings taken by parliaments is that this clause has been written – without public consent, and often in an atmosphere of extreme secrecy – into trade treaties.

A Real-World Example: The UK Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The justice ruled that schemes to dig the first deep coalmine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have had zero effect on our carbon budgets. The new government subsequently revoked the consent the Tories had issued. Currently, this victory faces being overturned by an offshore tribunal reporting to exclusively the companies petitioning it.

During August, a company whose ultimate owners reside in the Cayman Islands lodged a claim challenging the UK government. Recently a dispute settlement body in Washington DC was set up to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been allowed to proceed. The public has little idea how much this might be. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The government enacts a policy, the domestic court upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the court on the mining lawsuit was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has started suing another European state for this reason, seeking sixteen billion dollars: equivalent to half of government’s annual revenue. Among the counsel representing him there? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Threats

Politicians promised that these scenarios could not occur. Years ago, a former prime minister, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty after trade deal and there has not been a problem in the past.” A consultant on this matter described activists of “alarmism … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Predictions that “as corporations start to realise the influence they now possess, they will turn their attention from the weak nations to the developed economies” were dismissed with general mockery.

That prediction is now a reality. In the current period, fossil fuel and resource corporations have initiated a historic level of suits against nations across the economic spectrum, contesting – like the example of the Whitehaven project – official measures to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP