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What is your understand our system of government operates? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Statutes is maintained by the courts. End of story. However, that used to be how it operated in the past. Those days are over.

The Advent of Shadow Courts

In the modern era, foreign corporations, along with the billionaires behind them, have the power to sue nation states for the policies they pass, at offshore tribunals staffed by corporate lawyers. The cases are held in secret. Differing from national judiciaries, these panels grant no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even businesses operating from this country. The door is open solely for corporations based overseas.

If a tribunal finds that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, even billions.

This compensation represent not tangible damages but funds the panel members conclude the company might otherwise have made. The government could be forced to rescind the measure. It will be deterred from passing future laws along the same lines, worried about facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of cases are being brought, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a share of the awards. The result? National sovereignty and popular rule are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the choices taken by elected bodies is that this provision has been written – without public consent, and typically amid an atmosphere of extreme secrecy – inside international trade agreements.

A Real-World Example: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The justice ruled that schemes to excavate the first major coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The Labour government then withdrew the permission the previous administration had granted. Currently, this success could be compromised by an secret arbitration panel reporting to only the companies bringing the case.

In August, a corporate entity whose beneficial owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was convened to hear it.

The claimant is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. We have no idea how much this sum represents. Which individual is representing it against the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The government passes a law, the high court supports it, then a international entity disputes it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Case

Concurrently that the tribunal on the coalmine case was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case at present, but it appears probable that he may employ the arbitration process to challenge the penalties the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg on these grounds, seeking sixteen billion dollars: half that state's yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists argue that the EU’s hesitation in leveraging immobilised state funds as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.

Empty Promises and Mounting Costs

We were assured that such things could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this issue labelled campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by widespread derision.

That warning has come to pass. This year, energy and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – government attempts to prevent global warming. Corporations have so far won vast sums by using ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP