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Can you reckon our system of government works? It could be along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation are enforced by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Rise of Shadow Courts

In the modern era, international firms, along with the oligarchs behind them, have the power to sue governments for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings are conducted in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. The door is open solely for entities registered abroad.

If a tribunal finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, even billions.

This compensation represent not tangible damages but funds the panel members determine the company might otherwise have made. The government could be forced to abandon its policy. It will be hesitant to introducing similar legislation in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as companies observe each other, and private equity finance suits for a share of a share of the settlements. The outcome? Sovereignty and democratic governance are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions made by legislatures is that this provision has been inserted – absent public approval, and frequently under conditions of extreme secrecy – within international trade agreements.

A Concrete Instance: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The judge ruled that proposals to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine would have had no impact on climate commitments. The incoming administration then withdrew the permission the previous administration had granted. Today, this legal outcome is under threat by an offshore tribunal accountable to no one but the corporations filing the suit.

In August, a company whose beneficial owners are located in the tax haven initiated proceedings challenging the UK government. The previous week a tribunal in the United States was set up to hear it.

The company is litigating against the UK for the profits it might have made if the mine had been allowed to commence operations. The public has little idea how much this sum represents. Which individual is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The government enacts a policy, the high court validates it, then a international entity contests it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Challenge

On the same day that the court on the coalmine case was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case at present, but it is highly possible that he may employ the tribunal to contest the restrictions the UK levied against him after the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, demanding sixteen billion dollars: half that nation's yearly budget. Included in the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in using frozen oligarchs' funds as security for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over democratic administrations might be preventing the money Ukraine urgently requires.

Empty Promises and Mounting Costs

We were assured that these events wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” An adviser on this issue described critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “when companies grasp the power they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has now materialised. In the current period, energy and extraction companies have initiated a record number of suits against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP