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What is your reckon our system of government functions? Maybe similar to this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Advent of Shadow Tribunals

In the modern era, international firms, along with the wealthy individuals who own them, can sue elected administrations for the regulations they pass, at private courts composed of corporate lawyers. These proceedings take place in secret. Unlike our courts, these tribunals provide no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. Access is granted only to businesses registered abroad.

When a secret court determines that a government measure could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

This compensation constitute not real financial harm but funds the panel members conclude the company might otherwise have made. The administration may have to abandon its policy. It is discouraged from passing future laws along the same lines, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of cases are being brought, as companies learn from each other, and private equity finance suits in return for a portion of the awards. The result? Democratic sovereignty and democratic governance are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the choices made by parliaments is that this stipulation has been incorporated – absent public approval, and typically amid a climate of profound opacity – within bilateral investment treaties.

A Specific Example: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The presiding officer ruled that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no impact on our carbon budgets. The Labour government then withdrew the permission the Tories had granted. Currently, this success could be compromised by an secret arbitration panel accountable to exclusively the companies bringing the case.

Last August, a corporate entity whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Recently a arbitration panel in Washington DC was established to hear it.

The company is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. We have no clear indication how much this might be. Which individual is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The government passes a law, the high court supports it, then a international entity contests it through an unaccountable offshore tribunal, and a elected official works for its behalf.

The Russian Case

Concurrently that the tribunal on the coal mine dispute was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has started suing another European state for this reason, claiming a colossal sum: half that state's yearly budget. Included in the counsel on his side? Cherie Blair, spouse of the ex-UK leader.

Legal experts contend that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states could be blocking the money Ukraine critically depends on.

Misleading Claims and Escalating Costs

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this issue accused campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear such legal actions. Predictions that “when companies start to realise the authority they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with widespread derision.

That threat is now a reality. This year, energy and mining firms have lodged a historic level of claims against nations across the economic spectrum, contesting – like the example of the Whitehaven project – state efforts to stop global warming. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP