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Can you perceive our political system works? Maybe similar to this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation is upheld by the courts. That's it. However, that used to be how it used to work. No longer.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, and the oligarchs that control them, can sue nation states for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held in secret. In contrast to domestic courts, these panels provide no avenue for appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even businesses operating from this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums represent not actual losses but compensation the tribunal officials conclude the company might otherwise have made. The government might be compelled to drop the legislation. It becomes deterred from passing future laws in that area, for fear of facing litigation.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as companies learn from each other, and private equity fund legal actions in exchange for a portion of the takings. The outcome? Sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the choices made by elected bodies is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Real-World Case: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The judge found that proposals to open the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have no consequence on climate commitments. The new government then withdrew the permission the former government had granted. Now, this victory could be compromised by an offshore tribunal reporting to no one but the corporations petitioning it.

During August, a corporate entity whose final controllers are located in the tax haven initiated proceedings challenging the UK government. Recently a tribunal in Washington DC was established to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. We have little idea how much this might be. What legal team is representing it against the state? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a foreign company disputes it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case to date, but it seems likely that he will utilise the ISDS mechanism to contest the restrictions the UK enacted against him after the war in Ukraine. He has previously started suing a small nation for this reason, claiming a colossal sum: half that state's yearly income. Included in the lawyers acting for him in that case? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine critically depends on.

False Assurances and Escalating Threats

We were assured that such things were not possible. Previously, a senior politician, advocating for the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” A consultant on this matter described critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about these lawsuits. Predictions that “as corporations grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were met with scepticism.

That warning has come to pass. This year, energy and resource corporations have lodged a historic level of cases against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – official measures to stop environmental catastrophe. Corporations have to date won vast sums by using ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP