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How do you understand our political system operates? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, and the oligarchs who own them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. Such disputes are held away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises based in this country. The door is open solely for corporations registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s expected profits, it may order compensation of hundreds of millions, potentially billions.

This compensation constitute not real financial harm but money the arbitrators determine the company might otherwise have made. The government could be forced to drop the legislation. It becomes deterred from enacting future policies along the same lines, for fear of being sued.

A Process Spiralling Out of Control

Historically high figures of cases are being brought, as firms take cues from each other, and investment funds bankroll lawsuits for a share of a share of the settlements. The result? Sovereignty and popular rule are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the rulings taken by parliaments is that this clause has been inserted – absent public approval, and often in a climate of profound opacity – into bilateral investment treaties.

A Concrete Instance: The UK Coalmine

Last year, environmental campaigners secured a significant win at the high court. The justice determined that schemes to dig the first deep coalmine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the licence the Tories had approved. Currently, this victory could be compromised by an foreign court reporting to exclusively the corporations bringing the case.

During August, a firm whose final controllers are based in the offshore financial centre filed a lawsuit challenging the UK government. Last week a dispute settlement body in Washington DC was convened to hear it.

The claimant is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this sum represents. What legal team is serving as its counsel against the UK administration? An elected representative, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case so far, but it seems likely that he may employ the ISDS mechanism to challenge the restrictions the UK imposed on him after the war in Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, claiming a colossal sum: half that state's yearly budget. Part of the counsel representing him there? Cherie Blair, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in using frozen state funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states might be preventing the money Ukraine urgently requires.

Empty Promises and Mounting Risks

The public was told that such things were not possible. In 2014, a senior politician, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this topic labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms start to realise the power they now possess, they will turn their attention from the poorer states to the developed economies” were greeted by scepticism.

That warning has now materialised. This year, energy and mining firms have filed a record number of claims against nations rich and poor, opposing – similar to the Whitehaven project – government attempts to halt climate breakdown. Firms have so far won vast sums by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP