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What is your perceive our system of government works? Perhaps similar to this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. That's it. Yet, that used to be how it operated in the past. Not anymore.

The Advent of Shadow Courts

Today, foreign corporations, and the billionaires that control them, can sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. Such disputes are conducted in secret. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. The door is open exclusively to businesses registered abroad.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These awards represent not tangible damages but compensation the panel members determine the company could potentially have made. The government could be forced to rescind the measure. It is deterred from passing future laws along the same lines, for fear of facing litigation.

A Process Growing Exponentially

Historically high figures of cases are being brought, as firms take cues from each other, and investment funds finance suits for a share of a share of the settlements. The consequence? Democratic sovereignty and democratic governance are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the decisions made by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid an atmosphere of profound opacity – inside trade treaties.

A Concrete Case: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the high court. The judge determined that schemes to excavate the first new deep coal mine in the UK for a generation, in northwest England, were wrongly permitted by the previous government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The incoming administration then withdrew the permission the former government had approved. Now, this success faces being overturned by an offshore tribunal accountable to no one but the companies filing the suit.

In August, a corporate entity whose final controllers reside in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in Washington DC was set up to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been allowed to commence operations. We have no idea how much this might be. Which individual is serving as its counsel against the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a foreign company contests it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case to date, but it appears probable that he may employ the tribunal to challenge the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has started suing Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Included in the counsel on his side? Cherie Blair, married to the previous PM.

International law scholars believe that the EU’s delay in utilising seized Russian assets as security for its financial support package is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over democratic administrations could be blocking the finance Ukraine critically depends on.

Empty Promises and Growing Threats

The public was told that these scenarios were not possible. In 2014, a former prime minister, promoting the largest and riskiest of all investment pacts, stated: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” An expert on this issue accused activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “once firms start to realise the influence they now possess, they will turn their attention from the weak nations to the wealthy nations” were dismissed with scepticism.

That threat has come to pass. Recently, energy and resource corporations have initiated a historic level of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to prevent climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP