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Can you understand our political system works? It could be something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills become law. Statutes is maintained by the courts. That's it. However, that was how it operated in the past. Those days are over.

The Emergence of Shadow Courts

Today, international firms, and the oligarchs behind them, are able to litigate against nation states for the policies they pass, at private courts made up of commercial attorneys. The cases are conducted away from public scrutiny. Unlike our courts, these bodies allow no avenue for appeal or legal review. The general public are barred from bringing a case to them, nor can our government, including companies based in this country. The door is open exclusively to businesses based overseas.

Should an arbitration panel rules that a government measure might diminish the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

These awards represent not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The government may have to abandon its policy. It becomes hesitant to passing future laws in that area, worried about incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of cases are being brought, as companies learn from each other, and hedge funds fund legal actions for a share of a cut of the awards. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the decisions enacted by parliaments is that this stipulation has been written – absent public approval, and often in an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The justice found that proposals to excavate the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have zero effect on climate commitments. The new government subsequently revoked the permission the former government had granted. Now, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the corporations filing the suit.

During August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings versus the UK government. Recently a tribunal in the United States was established to consider the case.

The company is seeking compensation from the UK for the profits it might have made if the mine had been permitted to go ahead. Citizens have little idea how much this might be. What legal team is acting on its behalf in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The administration makes a decision, the domestic court validates it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it appears probable that he will utilise the tribunal to contest the sanctions the UK imposed on him following the invasion of Ukraine. He has previously initiated proceedings against another European state on these grounds, claiming sixteen billion dollars: an amount representing half government’s yearly budget. Part of the lawyers on his side? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over sovereign states could be blocking the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that these events could not occur. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this topic described critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “once firms begin to understand the influence they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with widespread derision.

That warning has now materialised. In the current period, energy and resource corporations have filed a historic level of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – government attempts to halt global warming. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained the majority. That equates to the combined GDP