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What is your reckon our system of government operates? Maybe something like this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills pass into law. Legislation is maintained by the courts. That's it. Well, that used to be how it used to work. Those days are over.

The Advent of Shadow Tribunals

Today, foreign corporations, or 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 away from public scrutiny. Unlike our courts, these bodies allow no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies operating from this country. They are open solely for entities operating from foreign soil.

When a secret court rules that a government measure might diminish the corporation’s anticipated profits, it may order damages of vast sums, even billions.

These sums represent not actual losses but funds the arbitrators determine the company might otherwise have made. The government may have to drop the legislation. It will be discouraged from passing future laws in that area, worried about facing litigation.

A System Running Rampant

Historically high figures of cases are being initiated, as corporations take cues from each other, and private equity fund legal actions for a share of a cut of the awards. The result? National sovereignty and democracy are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the decisions taken by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under conditions of profound opacity – into international trade agreements.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the High Court. The justice found that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have had no impact on national carbon targets. The new government then withdrew the licence the former government had issued. Currently, this victory could be compromised by an secret arbitration panel answering to only the companies filing the suit.

In August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Recently a arbitration panel in the United States was set up to consider the case.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to proceed. Citizens have little idea how much this could amount to. Who is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company challenges it through an secretive offshore tribunal, and a elected official works for its behalf.

An Oligarch's Case

Concurrently that the court on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case to date, but it appears probable that he’ll use the tribunal to contest the sanctions the UK levied against him following the Russian aggression. He has previously started suing another European state for this reason, claiming sixteen billion dollars: an amount representing half government’s yearly budget. Among the legal team on his side? the wife of a former prime minister, wife of the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine critically depends on.

False Assurances and Growing Threats

Politicians promised that these scenarios could not occur. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, declared: “The UK has signed trade deal upon trade deal and we have never seen a case in the past.” An adviser on this issue described campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries had to worry about such legal actions. Predictions that “as corporations begin to understand the power they now possess, they will turn their attention from the weak nations to the developed economies” were met with general mockery.

That prediction has now materialised. In the current period, oil and gas and resource corporations have lodged a record number of cases against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have so far won $114bn through ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP