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How do you reckon our political system functions? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. However, that was how it used to work. No longer.

The Advent of Shadow Tribunals

Today, foreign corporations, along with the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at private courts made up of commercial attorneys. These proceedings are held in secret. Unlike our courts, these tribunals provide no opportunity to appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even businesses based in this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel finds that a law or policy might diminish the corporation’s expected profits, it can award financial penalties of vast sums, even billions.

This compensation are based not on real financial harm but funds the panel members decide the company could potentially have made. The administration could be forced to rescind the measure. It becomes hesitant to introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as firms learn from each other, and investment funds bankroll lawsuits in exchange for a portion of the awards. The outcome? Sovereignty and democracy are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the rulings enacted by legislatures is that this stipulation has been incorporated – absent public approval, and typically amid a climate of extreme secrecy – inside international trade agreements.

A Real-World Example: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the high court. The justice found that proposals to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have had no impact on climate commitments. The new government subsequently revoked the licence the former government had approved. Currently, this legal outcome could be compromised by an offshore tribunal accountable to no one but the companies bringing the case.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging the UK government. Recently a tribunal in the US capital was established to adjudicate on it.

The company is litigating against the UK for the money it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this might be. Who is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The state enacts a policy, the domestic court supports it, then a foreign company contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the court on the mining lawsuit was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know nothing of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK levied against him following the Russian aggression. He has previously initiated proceedings against another European state with similar intent, demanding $16bn: half that government’s yearly budget. Included in the legal team on his side? a prominent lawyer, wife of the previous PM.

Legal experts believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its financial support package stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that such things were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty upon trade deal and we have never seen a problem in the past.” An expert on this issue labelled activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations should be concerned by these lawsuits. Predictions that “as corporations grasp the influence they’ve been granted, they will shift their focus from the weak nations to the developed economies” were greeted by general mockery.

That threat is now a reality. Recently, fossil fuel and mining firms have filed a historic level of claims against nations across the economic spectrum, contesting – similar to the Whitehaven project – state efforts to prevent climate breakdown. Corporations have so far won vast sums through ISDS, of which energy giants have obtained the majority. That represents the combined GDP