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What is your perceive our political system works? Maybe similar to this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. The law is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Rise of Shadow Courts

Today, foreign corporations, or the oligarchs behind them, are able to litigate against nation states for the policies they pass, at private courts composed of corporate lawyers. Such disputes are held in secret. Differing from national judiciaries, these bodies grant no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. They are open exclusively to entities based overseas.

When a secret court rules that a legislative action could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but funds the arbitrators conclude the company might otherwise have made. The state might be compelled to abandon its policy. It is hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The consequence? Sovereignty and democratic governance are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions enacted by legislatures is that this provision has been inserted – absent public approval, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, activists won a great victory at the High Court. The judge ruled that proposals to open the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on climate commitments. The Labour government then withdrew the permission the former government had granted. Now, this success could be compromised by an secret arbitration panel answering to no one but the corporations filing the suit.

During August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. The previous week a dispute settlement body in the United States was established to consider the case.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to commence operations. Citizens have little idea how much this might be. Who is representing it against the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot the MP. The administration passes a law, the domestic court upholds it, then a international entity disputes it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Case

On the same day that the court on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case to date, but it is highly possible that he may employ the arbitration process to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has previously started suing another European state for this reason, demanding sixteen billion dollars: half that nation's yearly income. Among the lawyers acting for him in that case? Cherie Blair, wife of the previous PM.

Legal experts argue that the EU’s procrastination in utilising seized Russian assets as guarantee for its financial support package arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over sovereign states might be preventing the money Ukraine critically depends on.

Empty Promises and Mounting Threats

The public was told that such things were not possible. In 2014, a government leader, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An adviser on this topic accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries should be concerned by ISDS claims. Warnings that “when companies start to realise the power bestowed upon them, they will turn their attention from the weak nations to the strong ones” were met with widespread derision.

That warning has now materialised. Recently, oil and gas and resource corporations have lodged a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – official measures to stop global warming. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP