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How do you understand our system of government functions? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills become law. Statutes is upheld by the courts. End of story. Yet, that was how it used to work. No longer.

The Emergence of Shadow Courts

Nowadays, international firms, along with the wealthy individuals who own them, can sue elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even enterprises headquartered in this country. Access is granted only to businesses based overseas.

If a tribunal finds that a government measure could harm the corporation’s projected profits, it has the power to grant compensation of vast sums, running into billions.

These sums represent not actual losses but money the panel members determine the company would perhaps have made. The state may have to drop the legislation. It is hesitant to passing future laws in that area, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The result? Democratic sovereignty and popular rule are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the rulings enacted by parliaments is that this clause has been incorporated – without democratic mandate, and often in an atmosphere of profound opacity – into trade treaties.

A Specific Example: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The justice determined that schemes to dig the first deep coalmine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration then withdrew the permission the Tories had granted. Currently, this victory could be compromised by an offshore tribunal answering to no one but the corporations filing the suit.

Last August, a firm whose final controllers are located in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in the US capital was convened to consider the case.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. We have no clear indication how much this sum represents. What legal team is representing it challenging the state? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration makes a decision, the high court validates it, then a international entity disputes it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Challenge

On the same day that the court on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case so far, but it is highly possible that he’ll use the arbitration process to fight the penalties the UK levied against him after the invasion of Ukraine. He has previously initiated proceedings against a small nation with similar intent, demanding $16bn: an amount representing half nation's yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Risks

We were assured that such things wouldn’t happen. Years ago, a government leader, advocating for the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a case in the past.” A consultant on this topic accused campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear such legal actions. Warnings that “as corporations grasp the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with scepticism.

That threat has now materialised. Recently, oil and gas and extraction companies have initiated a record number of claims against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP