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How do you perceive our system of government operates? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, and the oligarchs who own them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels made up of business advocates. The cases are conducted behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or legal review. The general public are unable to file a case to them, and neither can our government, including enterprises based in this country. They are open only to corporations registered abroad.

If a tribunal rules that a government measure could harm the corporation’s expected profits, it can award damages of vast sums, potentially billions.

These sums constitute not real financial harm but funds the arbitrators conclude the company might otherwise have made. The state may have to abandon its policy. It becomes deterred from introducing similar legislation along the same lines, worried about being sued.

A System Running Rampant

Record numbers of disputes are being filed, as firms learn from each other, and investment funds finance suits for a share of a share of the takings. The result? National sovereignty and popular rule are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the choices enacted by elected bodies is that this provision has been written – absent public approval, and typically amid a climate of profound opacity – into trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The judge found that proposals to open the first new deep coal mine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration later cancelled the permission the Tories had granted. Currently, this victory is under threat by an foreign court accountable to only the entities filing the suit.

During August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had received permission to proceed. We have no idea how much this could amount to. What legal team is serving as its counsel challenging the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the national judiciary upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know nothing of the case so far, but it seems likely that he’ll use the arbitration process to fight the restrictions the UK levied against him subsequent to the war in Ukraine. He has initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: an amount representing half state's yearly income. Included in the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

Politicians promised that these events could not occur. Previously, a government leader, promoting the most significant and hazardous of all such treaties, told us: “Britain has agreed to investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this matter described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by such legal actions. Warnings that “as corporations grasp the influence bestowed upon them, they will turn their attention from the weak nations to the developed economies” were greeted by general mockery.

That warning has now materialised. Recently, energy and mining firms have filed a unprecedented number of claims against nations rich and poor, challenging – as in the case of the UK mine – state efforts to prevent environmental catastrophe. Corporations have so far won vast sums via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP