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Can you reckon our political system operates? It could be something like this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. However, that used to be how it once functioned. Those days are over.

The Rise of Shadow Courts

In the modern era, international firms, and the billionaires that control them, can sue nation states for the laws they pass, at private courts made up of commercial attorneys. These proceedings are held behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, including businesses based in this country. Access is granted exclusively to entities registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions, running into billions.

These awards constitute not real financial harm but money the panel members decide the company might otherwise have made. The government might be compelled to abandon its policy. It will be deterred from passing future laws along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being brought, as corporations observe each other, and hedge funds bankroll lawsuits in return for a portion of the settlements. The result? Sovereignty and democratic governance are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the decisions taken by legislatures is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – inside trade treaties.

A Specific Instance: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the High Court. The presiding officer determined that schemes to excavate the first new deep coal mine in the UK for 30 years, in northwest England, had been wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the licence the former government had issued. Now, this success is under threat by an offshore tribunal answering to only the companies petitioning it.

During August, a corporate entity whose final controllers are located in the offshore financial centre lodged a claim against the UK government. The previous week a dispute settlement body in the United States was set up to adjudicate on it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. Citizens have little idea how much this could amount to. What legal team is representing it challenging the British government? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal 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, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he may employ the arbitration process to challenge the restrictions the UK enacted against him following the war in Ukraine. He has filed a claim against Luxembourg on these grounds, claiming sixteen billion dollars: an amount representing half government’s yearly budget. Among the legal team representing him there? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

Politicians promised that such things were not possible. Years ago, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” A consultant on this topic labelled activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies grasp the authority they now possess, they will turn their attention from the weak nations to the wealthy nations” were met with general mockery.

That prediction 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 – as in the case of the Whitehaven project – government attempts to prevent climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP