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How do you reckon our political system functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it operated in the past. No longer.

The Emergence of Shadow Courts

Today, foreign corporations, along with the oligarchs who own them, can sue governments for the policies they pass, at private courts staffed by commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or legal review. You or I are barred from bringing a case to them, just as our government, or even businesses operating from this country. They are open only to corporations based overseas.

If a tribunal finds that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards represent not real financial harm but compensation the tribunal officials determine the company might otherwise have made. The administration might be compelled to rescind the measure. It becomes discouraged from passing future laws along the same lines, due to the risk of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of cases are being brought, as corporations observe each other, and private equity bankroll lawsuits for a share of a portion of the settlements. The result? National sovereignty and democracy are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the decisions taken by parliaments is that this clause has been written – without public consent, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Concrete Case: The UK Coal Mine

Last year, a conservation group won a great victory at the high court. The presiding officer found that proposals to dig the first major coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on our carbon budgets. The incoming administration later cancelled the consent the former government had granted. Currently, this success could be compromised by an offshore tribunal accountable to exclusively the entities petitioning it.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands initiated proceedings challenging the UK government. Last week a tribunal in the US capital was set up to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. What legal team is serving as its counsel challenging the state? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The administration passes a law, the domestic court validates it, then a international entity contests it through an undemocratic private court, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case to date, but it appears probable that he will utilise the tribunal to challenge the sanctions the UK levied against him subsequent to the war in Ukraine. He has previously started suing a small nation for this reason, claiming $16bn: equivalent to half of state's annual revenue. Among the legal team representing him there? a prominent lawyer, married to the ex-UK leader.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as collateral for its financial support package stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that such things could not occur. Years ago, a government leader, advocating for the most significant and hazardous of all these agreements, declared: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this topic accused campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the power bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That threat has now materialised. In the current period, fossil fuel and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to halt environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP