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What is your perceive our system of government works? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that used to be how it used to work. No longer.

The Advent of Shadow Tribunals

In the modern era, foreign corporations, or the billionaires that control them, can sue elected administrations for the policies they pass, at private courts made up of corporate lawyers. The cases are held in secret. In contrast to domestic courts, these panels allow no avenue for appeal or judicial review. The general public cannot take a case to them, and neither can our government, including businesses headquartered in this country. They are open only to corporations registered abroad.

Should an arbitration panel rules that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions of pounds, potentially billions.

These awards represent not actual losses but compensation the tribunal officials conclude the company could potentially have made. The administration might be compelled to rescind the measure. It will be discouraged from enacting future policies along the same lines, worried about facing litigation.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being initiated, as firms take cues from each other, and private equity fund legal actions in exchange for a portion of the awards. The result? Sovereignty and democracy are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the choices enacted by legislatures is that this stipulation has been incorporated – without democratic mandate, and typically amid conditions of total confidentiality – within international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Last year, activists secured a significant win at the senior court. The presiding officer found that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, were unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the consent the Tories had issued. Now, this legal outcome is under threat by an offshore tribunal answering to only the entities petitioning it.

Last August, a firm whose beneficial owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the money it could have earned if the mine had been allowed to go ahead. We have no idea how much this could amount to. Which individual is representing it challenging the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company contests it through an secretive offshore tribunal, and a elected official works for its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the mining lawsuit was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the sanctions the UK imposed on him after the invasion of Ukraine. He has already started suing another European state with similar intent, seeking $16bn: half that state's annual revenue. Among the legal team on his side? Cherie Blair, wife of the ex-UK leader.

Legal experts argue that the EU’s hesitation in utilising seized state funds as collateral for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations might be preventing the money Ukraine desperately needs.

False Assurances and Growing Threats

The public was told that these scenarios could not occur. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and we have never seen a case in the past.” A consultant on this topic described critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “when companies start to realise the authority they now possess, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That prediction has now materialised. In the current period, fossil fuel and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Companies have so far won vast sums through ISDS, of which energy giants have obtained the majority. That equates to the combined GDP