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What is your understand our political system functions? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Statutes is upheld by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Advent of Shadow Courts

Today, foreign corporations, and the wealthy individuals who own them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these bodies provide no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even companies based in this country. They are open exclusively to businesses operating from foreign soil.

When a secret court finds that a government measure could harm the corporation’s projected profits, it has the power to grant damages of vast sums, running into billions.

This compensation represent not real financial harm but funds the arbitrators decide the company might otherwise have made. The state could be forced to rescind the measure. It is hesitant to introducing similar legislation in that area, for fear of being sued.

A Mechanism Running Rampant

Record numbers of legal actions are being filed, as corporations learn from each other, and private equity fund legal actions in exchange for a portion of the takings. The consequence? Sovereignty and democracy are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the choices taken by parliaments is that this stipulation has been incorporated – without public consent, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The judge ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have had zero effect on national carbon targets. The new government then withdrew the permission the former government had issued. Today, this legal outcome is under threat by an offshore tribunal answering to only the corporations petitioning it.

Last August, a firm whose beneficial owners are located in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in Washington DC was set up to hear it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to go ahead. We have no idea how much this sum represents. What legal team is serving as its counsel against the UK administration? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the high court upholds it, then a foreign company challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case to date, but it appears probable that he may employ the arbitration process to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has already started suing Luxembourg for this reason, demanding a colossal sum: an amount representing half nation's yearly budget. Among the counsel representing him there? a prominent lawyer, spouse of the ex-UK leader.

Legal experts argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Growing Risks

The public was told that such things could not occur. In 2014, a senior politician, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this topic labelled critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “as corporations grasp the influence bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were dismissed with scepticism.

That threat has now materialised. This year, oil and gas and resource corporations have lodged a record number of claims against nations rich and poor, challenging – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Corporations have thus far won vast sums by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP