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Can you perceive our system of government operates? It could be something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Statutes are enforced by the courts. End of story. Yet, that was how it used to work. Not anymore.

The Advent of Shadow Courts

Today, foreign corporations, and the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies operating from this country. They are open solely for corporations operating from foreign soil.

Should an arbitration panel rules that a legislative action may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation constitute not tangible damages but funds the panel members decide the company could potentially have made. The state could be forced to abandon its policy. It is discouraged from introducing similar legislation in that area, due to the risk of being sued.

A Process Running Rampant

Historically high figures of cases are being initiated, as corporations learn from each other, and hedge funds fund legal actions for a share of a portion of the settlements. The result? Sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the rulings enacted by legislatures is that this clause has been written – absent public approval, and frequently under conditions of extreme secrecy – within bilateral investment treaties.

A Concrete Case: The UK Coalmine

A year ago, a conservation group won a great victory at the high court. The justice ruled that schemes to open the first major coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The Labour government subsequently revoked the permission the former government had granted. Now, this success is under threat by an foreign court accountable to exclusively the companies bringing the case.

Last August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit versus the UK government. The previous week a tribunal in the US capital was convened to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had been allowed to proceed. We have no idea how much this sum represents. Who is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The government enacts a policy, the high court supports it, then a foreign company contests it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the court on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he may employ the arbitration process to contest the restrictions the UK imposed on him after the invasion of Ukraine. He has initiated proceedings against another European state for this reason, demanding sixteen billion dollars: equivalent to half of nation's annual revenue. Included in the lawyers on his side? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments could be blocking the funds Ukraine critically depends on.

Empty Promises and Mounting Risks

Politicians promised that these scenarios could not occur. In 2014, a government leader, championing the most significant and hazardous of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An expert on this matter labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat has now materialised. In the current period, energy and mining firms have lodged a historic level of claims against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Firms have thus far won vast sums via ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP