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Can you understand our political system works? Maybe something like this. We elect MPs. They legislate on bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. Simple as that. Yet, that’s how it operated in the past. Those days are over.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the billionaires who own them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are conducted in secret. In contrast to domestic courts, these panels grant no avenue for appeal or legal review. The general public cannot take a case to them, and neither can our government, or even enterprises operating from this country. The door is open solely for corporations based overseas.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions, even billions.

This compensation represent not actual losses but compensation the arbitrators decide the company might otherwise have made. The administration could be forced to drop the legislation. It is hesitant to introducing similar legislation of a similar nature, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as corporations observe each other, and private equity bankroll lawsuits in exchange for a share of the settlements. The result? National sovereignty and popular rule are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the rulings taken by elected bodies is that this clause has been incorporated – absent public approval, and often in conditions of extreme secrecy – into trade treaties.

A Specific Case: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the senior court. The justice found that schemes to excavate the first major coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have zero effect on climate commitments. The Labour government later cancelled the consent the previous administration had approved. Currently, this victory faces being overturned by an foreign court answering to only the corporations filing the suit.

Last August, a firm whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. Recently a tribunal in Washington DC was set up to adjudicate on it.

The company is suing the UK for the profits it would have generated if the mine had been allowed to go ahead. We have no idea how much this could amount to. What legal team is representing it challenging the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a sitting MP works for its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case to date, but it seems likely that he will utilise the arbitration process to fight the restrictions the UK imposed on him following the war in Ukraine. He has already started suing Luxembourg for this reason, claiming a colossal sum: equivalent to half of state's yearly budget. Included in the lawyers on his side? a prominent lawyer, married to the previous PM.

Trade specialists contend that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its financial support package is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these scenarios wouldn’t happen. Previously, a former prime minister, promoting the biggest and most dangerous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this matter described campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with widespread derision.

That warning has now materialised. This year, oil and gas and resource corporations have lodged a historic level of claims against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to stop climate breakdown. Firms have to date won $114bn via ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP