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How do you perceive our system of government works? Perhaps something like this. We elect MPs. They vote on bills. When a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. That's it. However, that used to be how it once functioned. No longer.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, along with the billionaires that control them, are able to litigate against nation states for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, including enterprises operating from this country. Access is granted exclusively to businesses registered abroad.

If a tribunal rules that a government measure could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These awards constitute not real financial harm but funds the panel members conclude the company could potentially have made. The state could be forced to abandon its policy. It is discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of legal actions are being brought, as firms learn from each other, and hedge funds bankroll lawsuits in return for a share of the awards. The outcome? Sovereignty and democracy are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings taken by elected bodies is that this stipulation has been inserted – absent public approval, and frequently under conditions of total confidentiality – inside international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer determined that proposals to open the first new deep coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the permission the Tories had issued. Today, this success could be compromised by an foreign court accountable to only the entities bringing the case.

Last August, a firm whose ultimate owners are based in the tax haven initiated proceedings versus the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

The company is suing the UK for the money it would have generated if the mine had been permitted to go ahead. Citizens have no clear indication how much this might be. What legal team is representing it in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case so far, but it is highly possible that he may employ the ISDS mechanism to challenge the sanctions the UK enacted against him after the Russian aggression. He has previously filed a claim against a small nation for this reason, demanding sixteen billion dollars: half that government’s yearly income. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios wouldn’t happen. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” An adviser on this topic described campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms grasp the influence they now possess, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. Recently, fossil fuel and resource corporations have lodged a historic level of suits against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP