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What is your perceive our system of government operates? Maybe similar to this. We elect MPs. They vote on bills. When a majority is achieved, the bills become law. The law is upheld by the courts. End of story. Yet, that was how it used to work. Not anymore.

The Emergence of Shadow Tribunals

Nowadays, international firms, or the billionaires that control them, can sue nation states for the policies they pass, at private courts composed of corporate lawyers. These proceedings take place behind closed doors. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even businesses based in this country. The door is open exclusively to entities operating from foreign soil.

Should an arbitration panel rules that a government measure could harm the corporation’s projected profits, it can award damages of vast sums, even billions.

This compensation constitute not real financial harm but funds the tribunal officials determine the company would perhaps have made. The administration could be forced to drop the legislation. It will be hesitant to enacting future policies in that area, worried about facing litigation.

A System Running Rampant

Historically high figures of legal actions are being initiated, as companies take cues from each other, and private equity finance suits in return for a share of the awards. The result? Democratic sovereignty and democracy are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the decisions taken by parliaments is that this provision has been incorporated – without democratic mandate, and frequently under an atmosphere of extreme secrecy – within international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge found that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have had no consequence on our carbon budgets. The Labour government then withdrew the permission the previous administration had approved. Today, this success could be compromised by an offshore tribunal reporting to exclusively the companies petitioning it.

In August, a company whose final controllers are located in the Cayman Islands initiated proceedings versus the UK government. Recently a dispute settlement body in the US capital was set up to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had received permission to commence operations. Citizens have no clear indication how much this could amount to. Who is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration passes a law, the national judiciary supports it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the court on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it appears probable that he may employ the ISDS mechanism to fight the penalties the UK enacted against him subsequent to the Russian aggression. He has already started suing a small nation on these grounds, demanding a colossal sum: equivalent to half of government’s yearly budget. Among the counsel acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

Politicians promised that these events could not occur. Years ago, a government leader, advocating for the largest and riskiest of all these agreements, told us: “We’ve signed investment treaty upon trade deal and we have never seen a case in the past.” A consultant on this topic accused activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear such legal actions. Predictions that “when companies start to realise the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with scepticism.

That prediction has come to pass. This year, oil and gas and mining firms have lodged a record number of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – government attempts to halt climate breakdown. Firms have to date won vast sums by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP