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Can you reckon our system of government operates? It could be similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. That's it. Well, that’s how it operated in the past. Those days are over.

The Emergence of Shadow Courts

Nowadays, foreign corporations, and the oligarchs who own them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of business advocates. The cases are conducted in secret. Unlike our courts, these bodies allow no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. They are open only to businesses registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s expected profits, it may order damages of hundreds of millions, even billions.

These awards are based not on actual losses but compensation the panel members determine the company might otherwise have made. The government might be compelled to drop the legislation. It is hesitant to passing future laws of a similar nature, worried about being sued.

A Mechanism Running Rampant

Historically high figures of disputes are being filed, as firms observe each other, and private equity bankroll lawsuits in exchange for a portion of the awards. The result? National sovereignty and democratic governance are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the rulings taken by legislatures is that this clause has been inserted – without public consent, and typically amid a climate of total confidentiality – into international trade agreements.

A Specific Example: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the high court. The presiding officer found that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on national carbon targets. The new government later cancelled the licence the Tories had approved. Now, this legal outcome could be compromised by an offshore tribunal reporting to only the corporations bringing the case.

Last August, a firm whose beneficial owners are located in the offshore financial centre initiated proceedings challenging the UK government. The previous week a dispute settlement body in the US capital was convened to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Who is serving as its counsel in opposition to the state? A sitting MP, and former attorney-general in the outgoing administration, that great patriot the MP. The state passes a law, the high court supports it, then a international entity disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Lawsuit

On the same day that the court on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case so far, but it is highly possible that he’ll use the tribunal to challenge the sanctions the UK enacted against him following the invasion of Ukraine. He has already filed a claim against another European state with similar intent, seeking sixteen billion dollars: an amount representing half government’s annual revenue. Part of the legal team representing him there? a prominent lawyer, wife of the ex-UK leader.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as guarantee for its financial support package arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

Politicians promised that these scenarios were not possible. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has not been a case in the past.” An expert on this matter accused activists of “alarmism … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “when companies begin to understand the authority they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were met with widespread derision.

That threat is now a reality. This year, oil and gas and mining firms have lodged a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the Whitehaven project – official measures to stop environmental catastrophe. Companies have to date won $114bn via ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP