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How do you understand our political system functions? Perhaps something like this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Statutes is maintained by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, and the oligarchs who own them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by business advocates. These proceedings take place behind closed doors. Differing from national judiciaries, these panels grant no opportunity to appeal or legal review. The general public are unable to file a case to them, and neither can our government, including companies headquartered in this country. They are open only to businesses registered abroad.

When a secret court determines that a government measure might diminish the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, even billions.

These sums constitute not real financial harm but compensation the panel members decide the company might otherwise have made. The state may have to drop the legislation. It is discouraged from enacting future policies of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being filed, as companies observe each other, and private equity fund legal actions for a share of a cut of the awards. The result? Sovereignty and democratic governance are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the decisions enacted by legislatures is that this clause has been written – without democratic mandate, and frequently under conditions of extreme secrecy – inside international trade agreements.

A Concrete Case: The UK Coal Mine

A year ago, activists won a great victory at the senior court. The justice determined that plans to excavate the first new deep coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no impact on national carbon targets. The new government later cancelled the licence the former government had granted. Today, this victory is under threat by an offshore tribunal reporting to only the entities filing the suit.

During August, a corporate entity whose final controllers are based in the tax haven filed a lawsuit versus the UK government. The previous week a tribunal in Washington DC was set up to adjudicate on it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had received permission to proceed. We have no idea how much this could amount to. Who is acting on its behalf in opposition to the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he’ll use the tribunal to contest the sanctions the UK enacted against him subsequent to the Russian aggression. He has already started suing another European state with similar intent, claiming a colossal sum: an amount representing half nation's yearly income. Part of the counsel on his side? Cherie Blair, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in leveraging immobilised Russian assets as security for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

False Assurances and Mounting Risks

We were assured that these scenarios could not occur. Years ago, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An expert on this matter accused critics of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations should be concerned by these lawsuits. Predictions that “as corporations start to realise the power they’ve been granted, they will turn their attention from the weak nations to the developed economies” were greeted by widespread derision.

That warning has come to pass. In the current period, oil and gas and extraction companies have lodged a historic level of suits against nations across the economic spectrum, challenging – similar to the Whitehaven project – government attempts to prevent environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP