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How do you understand our political system functions? Perhaps similar to this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills become law. Legislation is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Rise of Shadow Courts

In the modern era, overseas companies, and the oligarchs behind them, are able to litigate against nation states for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, including companies operating from this country. Access is granted solely for corporations operating from foreign soil.

When a secret court determines that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

These sums are based not on real financial harm but compensation the arbitrators decide the company would perhaps have made. The state could be forced to drop the legislation. It will be deterred from passing future laws along the same lines, worried about being sued.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as corporations learn from each other, and hedge funds bankroll lawsuits in return for a cut of the takings. The outcome? National sovereignty and popular rule are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings made by parliaments is that this clause has been written – absent public approval, and frequently under conditions of total confidentiality – into international trade agreements.

A Concrete Example: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the high court. The presiding officer found that proposals to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no consequence on climate commitments. The new government subsequently revoked the permission the former government had approved. Today, this victory faces being overturned by an offshore tribunal reporting to exclusively the companies filing the suit.

During August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit against the UK government. Recently a arbitration panel in the US capital was convened to consider the case.

This firm is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. We have little idea how much this could amount to. Which individual is serving as its counsel challenging the British government? A sitting MP, and former attorney-general in the Conservative government, that great patriot the MP. The government enacts a policy, the domestic court supports it, then a international entity contests it through an undemocratic private court, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he will utilise the tribunal to contest the penalties the UK levied against him after the invasion of Ukraine. He has filed a claim against a small nation with similar intent, seeking $16bn: half that nation's yearly budget. Among the legal team representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as guarantee for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states could be blocking the finance Ukraine urgently requires.

Empty Promises and Mounting Costs

The public was told that such things wouldn’t happen. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An expert on this topic accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear such legal actions. Warnings that “once firms start to realise the authority they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That warning has now materialised. Recently, oil and gas and extraction companies have initiated a unprecedented number of cases against nations across the economic spectrum, contesting – like the example of the UK mine – state efforts to halt global warming. Firms have thus far won vast sums by using ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP