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What is your understand our political system functions? Maybe similar to this. We elect MPs. They legislate on bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. That's it. However, that was how it used to work. Those days are over.

The Rise of Shadow Arbitration Panels

Nowadays, international firms, and the oligarchs behind them, are able to litigate against nation states for the regulations they pass, at private courts composed of commercial attorneys. These proceedings take place in secret. Differing from national judiciaries, these bodies provide no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, including businesses headquartered in this country. They are open only to entities based overseas.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it may order damages of vast sums, running into billions.

These sums constitute 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 enacting future policies along the same lines, due to the risk of being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being filed, as firms learn from each other, and hedge funds finance suits in return for a portion of the takings. The consequence? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings enacted by elected bodies is that this stipulation has been incorporated – without public consent, and often in an atmosphere of total confidentiality – into international trade agreements.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the senior court. The judge determined that schemes to dig the first major coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the previous government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the former government had approved. Currently, this victory is under threat by an offshore tribunal accountable to no one but the companies bringing the case.

During August, a firm whose beneficial owners are based in the Cayman Islands lodged a claim versus the UK government. The previous week a dispute settlement body in the US capital was convened to hear it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been permitted to go ahead. The public has little idea how much this might be. What legal team is acting on its behalf in opposition to the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a international entity contests it through an unaccountable arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

Concurrently that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the restrictions the UK enacted against him following the war in Ukraine. He has previously initiated proceedings against a small nation with similar intent, claiming a colossal sum: equivalent to half of state's annual revenue. Among the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s delay in utilising seized oligarchs' funds as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these scenarios were not possible. Previously, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “The UK has signed trade deal upon trade deal and there has never been a problem in the past.” An adviser on this issue described campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations begin to understand the authority they now possess, they will shift their focus from the weak nations to the developed economies” were dismissed with scepticism.

That warning is now a reality. Recently, fossil fuel and resource corporations have initiated a unprecedented number of claims against nations across the economic spectrum, opposing – similar to the Whitehaven project – state efforts to stop climate breakdown. Firms have thus far won $114bn via ISDS, of which energy giants have obtained the majority. That equates to the combined GDP