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What is your perceive our system of government works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. End of story. Yet, that was how it operated in the past. No longer.

The Advent of Shadow Tribunals

Today, foreign corporations, along with the oligarchs who own them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of business advocates. The cases are conducted behind closed doors. Unlike our courts, these bodies provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, nor can our government, including businesses operating from this country. The door is open exclusively to corporations based overseas.

Should an arbitration panel finds that a law or policy could harm the corporation’s expected profits, it can award compensation of hundreds of millions, running into billions.

These awards are based not on tangible damages but money the arbitrators determine the company might otherwise have made. The administration could be forced to abandon its policy. It is hesitant to passing future laws of a similar nature, due to the risk of being sued.

A System Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies take cues from each other, and private equity fund legal actions in exchange for a portion of the settlements. The consequence? Sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the choices made by elected bodies is that this stipulation has been inserted – without democratic mandate, and typically amid conditions of profound opacity – inside international trade agreements.

A Specific Instance: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the high court. The judge ruled that proposals to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the licence the Tories had granted. Today, this success is under threat by an offshore tribunal reporting to no one but the companies bringing the case.

In August, a firm whose beneficial owners are based in the tax haven initiated proceedings versus the UK government. Last week a tribunal in Washington DC was established to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to go ahead. We have no idea how much this sum represents. What legal team is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a overseas corporation contests it through an undemocratic private court, and a member of our parliament acts on its behalf.

An Oligarch's Case

Simultaneously that the panel on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case to date, but it is highly possible that he will utilise the arbitration process to fight the restrictions the UK levied against him following the war in Ukraine. He has previously filed a claim against a small nation for this reason, seeking a colossal sum: an amount representing half state's yearly budget. Part of the legal team representing him there? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in using frozen Russian assets as guarantee for its financial support package is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations could be blocking the money Ukraine urgently requires.

Misleading Claims and Escalating Costs

We were assured that such things were not possible. In 2014, a senior politician, championing the largest and riskiest of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this issue labelled campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by ISDS claims. Predictions that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning has now materialised. Recently, fossil fuel and mining firms have initiated a record number of suits against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to stop global warming. Firms have so far won vast sums through ISDS, of which energy giants have secured the majority. That equates to the combined GDP