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Can you understand our system of government works? It could be similar to this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills become law. The law is maintained by the courts. End of story. However, that’s how it used to work. No longer.

The Rise of Shadow Tribunals

In the modern era, overseas companies, and the billionaires who own them, are able to litigate against elected administrations for the laws they pass, at private courts staffed by corporate lawyers. Such disputes are held in secret. Differing from national judiciaries, these bodies allow no avenue for appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even enterprises operating from this country. The door is open only to entities based overseas.

If a tribunal rules that a government measure could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These awards represent not real financial harm but funds the tribunal officials conclude the company could potentially have made. The administration could be forced to rescind the measure. It will be hesitant to introducing similar legislation in that area, worried about being sued.

A System Spiralling Out of Control

Unprecedented levels of disputes are being brought, as firms learn from each other, and investment funds bankroll lawsuits in return for a cut of the takings. The consequence? Sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions made by legislatures is that this stipulation has been written – absent public approval, and frequently under conditions of extreme secrecy – into international trade agreements.

A Specific Instance: The UK Coalmine

Last year, activists won a great victory at the senior court. The justice ruled that schemes to dig the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on national carbon targets. The new government then withdrew the permission the former government had approved. Today, this success is under threat by an offshore tribunal reporting to exclusively the corporations filing the suit.

Last August, a company whose beneficial owners are located in the Cayman Islands lodged a claim against the UK government. The previous week a arbitration panel in the US capital was convened to consider the case.

The company is litigating against the UK for the money it could have earned if the mine had received permission to proceed. We have no clear indication how much this sum represents. Who is serving as its counsel against the UK administration? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a overseas corporation challenges it through an undemocratic private court, and a elected official works for its behalf.

A Sanctions Case

On the same day that the panel on the coalmine case was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has started suing Luxembourg on these grounds, claiming $16bn: equivalent to half of nation's annual revenue. Included in the legal team representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s procrastination in leveraging immobilised state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

The public was told that these events could not occur. Years ago, a senior politician, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed investment treaty upon trade deal and there has not been a issue in the past.” A consultant on this issue accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “as corporations begin to understand the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were greeted by scepticism.

That warning has now materialised. This year, fossil fuel and extraction companies have initiated a record number of suits against nations both wealthy and developing, challenging – like the example of the Whitehaven project – state efforts to halt global warming. Firms have thus far won $114bn through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP