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Can you reckon our system of government works? It could be something like this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Yet, that was how it operated in the past. Those days are over.

The Advent of Shadow Tribunals

Nowadays, overseas companies, and the oligarchs behind them, are able to litigate against nation states for the laws they pass, at private courts made up of corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even companies headquartered in this country. They are open solely for entities based overseas.

If a tribunal determines that a legislative action could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not tangible damages but funds the panel members conclude the company might otherwise have made. The government may have to abandon its policy. It becomes hesitant to introducing similar legislation in that area, worried about being sued.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations learn from each other, and private equity finance suits in return for a share of the takings. The consequence? National sovereignty and democratic governance are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the rulings taken by legislatures is that this provision has been incorporated – absent public approval, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The justice ruled that proposals to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no consequence on climate commitments. The new government then withdrew the licence the previous administration had approved. Now, this success is under threat by an offshore tribunal answering to no one but the corporations bringing the case.

Last August, a firm whose beneficial owners reside in the Cayman Islands initiated proceedings against the UK government. The previous week a dispute settlement body in Washington DC was established to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had received permission to commence operations. We have no clear indication how much this sum represents. Who is serving as its counsel in opposition to the UK administration? A member of parliament, and former attorney-general in the previous government, the noted patriot the MP. The government passes a law, the high court validates it, then a international entity challenges it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know little of the case to date, but it is highly possible that he will utilise the tribunal to challenge the sanctions the UK enacted against him after the Russian aggression. He has already filed a claim against another European state on these grounds, seeking sixteen billion dollars: equivalent to half of government’s annual revenue. Part of the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Legal experts believe that the EU’s hesitation in using frozen Russian assets as security for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

Empty Promises and Growing Costs

Politicians promised that such things could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade deal upon trade deal and there has never been a case in the past.” An adviser on this topic labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about ISDS claims. Warnings that “once firms start to realise the influence bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were met with scepticism.

That threat has now materialised. This year, energy and resource corporations have initiated a historic level of cases against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP