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How do you reckon our system of government works? It could be along the lines of this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. End of story. However, that was how it operated in the past. Those days are over.

The Emergence of Shadow Courts

Nowadays, overseas companies, along with the oligarchs that control them, have the power to sue nation states for the regulations they pass, at private courts made up of business advocates. These proceedings are held away from public scrutiny. Unlike our courts, these tribunals allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, including enterprises headquartered in this country. They are open exclusively to businesses based overseas.

When a secret court rules that a legislative action may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

This compensation are based not on actual losses but funds the arbitrators decide the company could potentially have made. The state might be compelled to drop the legislation. It becomes deterred from introducing similar legislation in that area, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being filed, as companies take cues from each other, and hedge funds bankroll lawsuits for a share of a portion of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the rulings made by parliaments is that this clause has been written – without public consent, and frequently under a climate of total confidentiality – into bilateral investment treaties.

A Real-World Instance: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the high court. The presiding officer found that plans to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the permission the previous administration had issued. Now, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the entities filing the suit.

In August, a firm whose beneficial owners are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a tribunal in the US capital was set up to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. We have no clear indication how much this could amount to. Which individual is representing it challenging the state? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a international entity challenges it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case so far, but it appears probable that he may employ the arbitration process to contest the sanctions the UK levied against him after the war in Ukraine. He has initiated proceedings against another European state for this reason, claiming a colossal sum: half that nation's yearly budget. Included in the counsel acting for him in that case? a prominent lawyer, married to the former British prime minister.

Legal experts argue that the EU’s hesitation in utilising seized oligarchs' funds as security for its financial support package arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Growing Threats

We were assured that these events could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An adviser on this topic labelled campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear such legal actions. Warnings that “when companies grasp the authority they now possess, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.

That prediction is now a reality. This year, oil and gas and extraction companies have lodged a record number of cases against nations both wealthy and developing, challenging – similar to the UK mine – state efforts to halt climate breakdown. Corporations have so far won $114bn through ISDS, of which energy giants have obtained the majority. That equates to the combined GDP