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What is your understand our system of government works? Maybe similar to this. We elect MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. Well, that was how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

Nowadays, foreign corporations, along with the wealthy individuals behind them, can sue governments for the regulations they pass, at private courts staffed by commercial attorneys. The cases take place in secret. Differing from national judiciaries, these tribunals grant no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises operating from this country. The door is open exclusively to entities based overseas.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

These awards constitute not real financial harm but funds the tribunal officials conclude the company could potentially have made. The government might be compelled to abandon its policy. It is hesitant to passing future laws in that area, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of legal actions are being initiated, as corporations take cues from each other, and hedge funds fund legal actions in return for a share of the settlements. The consequence? National sovereignty and democracy are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the rulings made by elected bodies is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – inside trade treaties.

A Specific Example: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the High Court. The judge determined that plans to open the first major coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had no consequence on our carbon budgets. The incoming administration then withdrew the licence the former government had approved. Now, this legal outcome faces being overturned by an offshore tribunal accountable to no one but the entities bringing the case.

Last August, a firm whose ultimate owners are located in the Cayman Islands filed a lawsuit against the UK government. Last week a tribunal in the US capital was established to hear it.

The company is litigating against the UK for the profits it might have made if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. What legal team is serving as its counsel against the UK administration? A member of parliament, and former attorney-general in the Conservative government, that great patriot the MP. The state makes a decision, the domestic court validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

On the same day that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case to date, but it seems likely that he will utilise the tribunal to contest the penalties the UK levied against him after the Russian aggression. He has previously filed a claim against a small nation for this reason, seeking a colossal sum: equivalent to half of nation's yearly budget. Part of the counsel representing him there? a prominent lawyer, wife of the former British prime minister.

Trade specialists argue that the EU’s hesitation in leveraging immobilised state funds as collateral for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Escalating Costs

Politicians promised that these events were not possible. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” A consultant on this topic accused activists of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations should be concerned by these lawsuits. Predictions that “as corporations grasp the power they now possess, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with general mockery.

That prediction has come to pass. This year, energy and resource corporations have lodged a record number of claims against nations rich and poor, contesting – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured the majority. That equates to the combined GDP