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How do you reckon our political system operates? Perhaps similar to this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that’s how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

Today, foreign corporations, and the oligarchs who own them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held in secret. In contrast to domestic courts, these tribunals allow no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, including enterprises headquartered in this country. Access is granted only to corporations based overseas.

If a tribunal finds that a legislative action might diminish the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, even billions.

These sums represent not real financial harm but compensation the panel members decide the company might otherwise have made. The state might be compelled to rescind the measure. It becomes discouraged from passing future laws in that area, worried about being sued.

A Process Growing Exponentially

Historically high figures of disputes are being brought, as firms learn from each other, and hedge funds fund legal actions in exchange for a portion of the awards. The outcome? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the decisions made by elected bodies is that this provision has been written – absent public approval, and often in conditions of total confidentiality – within trade treaties.

A Real-World Instance: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the high court. The judge ruled that plans to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have no consequence on our carbon budgets. The new government subsequently revoked the permission the Tories had issued. Now, this victory faces being overturned by an secret arbitration panel accountable to only the companies petitioning it.

During August, a company whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the US capital was set up to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. Which individual is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot the MP. The government makes a decision, the national judiciary supports it, then a foreign company contests it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case so far, but it appears probable that he will utilise the arbitration process to contest the penalties the UK levied against him after the invasion of Ukraine. He has previously initiated proceedings against a small nation with similar intent, seeking $16bn: half that government’s yearly budget. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as security for its financial support package is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments could be blocking the money Ukraine urgently requires.

Misleading Claims and Growing Threats

We were assured that such things could not occur. Previously, a former prime minister, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed trade deal after trade deal and there has not been a case in the past.” An expert on this matter labelled critics of “alarmism … in reality, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. In the current period, oil and gas and mining firms have filed a unprecedented number of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Firms have so far won $114bn by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP