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Can you reckon our political system operates? Maybe along the lines of this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. That's it. However, that was how it once functioned. No longer.

The Rise of Shadow Tribunals

In the modern era, international firms, or the oligarchs who own them, can sue nation states for the policies they pass, at offshore tribunals composed of commercial attorneys. The cases are held away from public scrutiny. Unlike our courts, these panels provide no right of appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, or even businesses based in this country. The door is open solely for entities based overseas.

When a secret court rules that a government measure could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions, running into billions.

This compensation constitute not tangible damages but compensation the panel members conclude the company could potentially have made. The administration might be compelled to rescind the measure. It becomes discouraged from passing future laws in that area, worried about incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of legal actions are being filed, as corporations learn from each other, and investment funds fund legal actions for a share of a share of the awards. The consequence? Sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the choices enacted by legislatures is that this provision has been incorporated – without public consent, and typically amid an atmosphere of total confidentiality – into international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, activists won a great victory at the High Court. The judge ruled that plans to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have had no impact on climate commitments. The Labour government then withdrew the licence the previous administration had approved. Currently, this success could be compromised by an foreign court reporting to only the corporations filing the suit.

Last August, a firm whose beneficial owners reside in the offshore financial centre lodged a claim challenging the UK government. Recently a dispute settlement body in the US capital was set up to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had been permitted to proceed. The public has no idea how much this sum represents. Who is serving as its counsel against the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court validates it, then a international entity challenges it through an secretive private court, and a elected official acts on its behalf.

A Sanctions Case

On the same day that the panel on the coalmine case was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are little of the case at present, but it appears probable that he will utilise the ISDS mechanism to fight the sanctions the UK imposed on him following the Russian aggression. He has previously filed a claim against a small nation for this reason, demanding $16bn: half that state's yearly income. Included in the counsel representing him there? a prominent lawyer, married to the former British prime minister.

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

Empty Promises and Mounting Risks

Politicians promised that such things were not possible. Previously, a former prime minister, promoting the most significant and hazardous of all such treaties, stated: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” An expert on this topic accused campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about ISDS claims. Warnings that “as corporations begin to understand the authority they now possess, they will redirect their efforts from the poorer states to the strong ones” were met with widespread derision.

That warning is now a reality. In the current period, fossil fuel and mining firms have initiated a unprecedented number of suits against nations rich and poor, challenging – like the example of the Whitehaven project – government attempts to stop global warming. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained $84bn. That represents the combined GDP