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Can you reckon our system of government functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. However, that used to be how it operated in the past. No longer.

The Rise of Shadow Courts

Nowadays, foreign corporations, and the oligarchs who own them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of business advocates. Such disputes take place in secret. In contrast to domestic courts, these tribunals provide no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, or even enterprises based in this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court finds that a legislative action could harm the corporation’s expected profits, it can award damages of vast sums, potentially billions.

This compensation constitute not tangible damages but money the tribunal officials determine the company might otherwise have made. The government might be compelled to drop the legislation. It is hesitant to passing future laws of a similar nature, for fear of being sued.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as firms take cues from each other, and hedge funds finance suits in exchange for a cut of the awards. The result? Sovereignty and democracy are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the decisions enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and often in conditions of total confidentiality – within trade treaties.

A Concrete Example: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge determined that plans to open the first major coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the licence the Tories had issued. Currently, this victory is under threat by an foreign court reporting to no one but the corporations bringing the case.

Last August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit challenging the UK government. The previous week a arbitration panel in the US capital was set up to consider the case.

The claimant is litigating against the UK for the revenue it would have generated if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. What legal team is representing it against the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a overseas corporation challenges it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Challenge

Simultaneously that the panel on the mining lawsuit was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he may employ the tribunal to contest the penalties the UK imposed on him subsequent to the war in Ukraine. He has already started suing Luxembourg with similar intent, claiming sixteen billion dollars: equivalent to half of nation's yearly income. Included in the counsel on his side? the wife of a former prime minister, married to the ex-UK leader.

Legal experts contend that the EU’s hesitation in utilising seized oligarchs' funds as security for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over elected governments may be obstructing the funds Ukraine desperately needs.

Empty Promises and Escalating Costs

Politicians promised that these events wouldn’t happen. Previously, a senior politician, promoting the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” A consultant on this issue accused campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “when companies start to realise the influence they now possess, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That warning has now materialised. This year, energy and extraction companies have filed a record number of suits against nations rich and poor, opposing – like the example of the UK mine – government attempts to prevent global warming. Companies have to date won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP