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How do you perceive our political system works? Maybe something like this. We elect MPs. They vote on bills. If a majority is secured, the bills pass into law. Statutes is upheld by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, along with the billionaires that control them, can sue governments for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings take place behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even companies based in this country. Access is granted solely for businesses registered abroad.

When a secret court finds that a government measure may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums are based not on actual losses but money the tribunal officials conclude the company would perhaps have made. The administration may have to abandon its policy. It becomes hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations observe each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The consequence? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices taken by elected bodies is that this clause has been written – without public consent, and often in conditions of total confidentiality – inside international trade agreements.

A Specific Case: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the High Court. The judge ruled that proposals to excavate the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine could have zero effect on national carbon targets. The incoming administration then withdrew the permission the previous administration had approved. Today, this legal outcome faces being overturned by an secret arbitration panel accountable to only the corporations filing the suit.

Last August, a company whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. The previous week a dispute settlement body in the United States was established to hear it.

The company is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The government enacts a policy, the high court supports it, then a international entity contests it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case at present, but it seems likely that he’ll use the arbitration process to fight the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously initiated proceedings against another European state for this reason, seeking $16bn: an amount representing half government’s yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Threats

We were assured that these scenarios were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An adviser on this issue labelled critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were met with widespread derision.

That warning has come to pass. In the current period, energy and resource corporations have initiated a historic level of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Companies have so far won vast sums via ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP