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What is your perceive our political system works? It could be similar to this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills become law. Statutes is maintained by the courts. End of story. Well, that was how it used to work. No longer.

The Emergence of Shadow Courts

Today, foreign corporations, along with the wealthy individuals that control them, have the power to sue governments for the laws they pass, at secret arbitration panels composed of business advocates. The cases are held in secret. Unlike our courts, these bodies allow no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, including enterprises operating from this country. They are open solely for businesses based overseas.

When a secret court rules that a government measure could harm the corporation’s projected profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards are based not on tangible damages but compensation the tribunal officials decide the company might otherwise have made. The administration might be compelled to drop the legislation. It will be hesitant to enacting future policies along the same lines, due to the risk of being sued.

A System Spiralling Out of Control

Historically high figures of legal actions are being filed, as corporations learn from each other, and private equity fund legal actions for a share of a share of the takings. The consequence? Democratic sovereignty and democratic governance are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the choices enacted by parliaments is that this clause has been incorporated – without public consent, and typically amid an atmosphere of total confidentiality – within trade treaties.

A Specific Case: The Whitehaven Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The presiding officer found that plans to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have no impact on national carbon targets. The Labour government subsequently revoked the permission the previous administration had granted. Today, this victory faces being overturned by an offshore tribunal answering to no one but the corporations petitioning it.

In August, a firm whose beneficial owners are based in the tax haven initiated proceedings versus the UK government. The previous week a dispute settlement body in Washington DC was convened to hear it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to proceed. Citizens have no idea how much this could amount to. Who is serving as its counsel in opposition to the British government? A member of parliament, and ex-law officer in the previous government, the noted patriot the MP. The administration enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an unaccountable private court, and a elected official works for its behalf.

A Sanctions Case

Simultaneously that the court on the coalmine case was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the sanctions the UK imposed on him after the war in Ukraine. He has already started suing a small nation for this reason, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Included in the lawyers on his side? a prominent lawyer, married to the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized oligarchs' funds as security for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over sovereign states could be blocking the money Ukraine desperately needs.

Misleading Claims and Mounting Costs

We were assured that such things wouldn’t happen. In 2014, a former prime minister, championing the most significant and hazardous of all investment pacts, stated: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An adviser on this topic labelled campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That prediction has come to pass. Recently, fossil fuel and extraction companies have filed a record number of suits against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Firms have thus far won $114bn by using ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP