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What is your reckon our political system works? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Rise of Shadow Tribunals

Today, international firms, along with the wealthy individuals that control them, have the power to sue nation states for the regulations they pass, at private courts made up of business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these panels grant no avenue for appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, including companies operating from this country. Access is granted only to entities based overseas.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it can award damages of hundreds of millions, even billions.

These awards are based not on real financial harm but compensation the tribunal officials conclude the company would perhaps have made. The government may have to drop the legislation. It becomes deterred from passing future laws of a similar nature, due to the risk of facing litigation.

A System Running Rampant

Unprecedented levels of cases are being initiated, as corporations observe each other, and private equity fund legal actions in return for a share of the takings. The consequence? Democratic sovereignty and democracy are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the choices taken by elected bodies is that this clause has been inserted – without democratic mandate, and frequently under a climate of profound opacity – inside international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge determined that plans to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the permission the former government had issued. Today, this success could be compromised by an offshore tribunal reporting to only the companies petitioning it.

During August, a company whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was established to consider the case.

The claimant is suing the UK for the money it would have generated if the mine had been permitted to commence operations. We have little idea how much this might be. What legal team is representing it challenging the British government? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a international entity contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Concurrently that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case so far, but it seems likely that he will utilise the arbitration process to challenge the restrictions the UK imposed on him after the invasion of Ukraine. He has already filed a claim against a small nation for this reason, seeking $16bn: equivalent to half of nation's yearly budget. Part of the counsel on his side? the wife of a former prime minister, wife of the former British prime minister.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as guarantee for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Growing Costs

We were assured that these scenarios were not possible. In 2014, a government leader, advocating for the most significant and hazardous of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this matter labelled campaigners of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies begin to understand the authority they now possess, they will redirect their efforts from the poorer states to the developed economies” were met with general mockery.

That warning has now materialised. This year, oil and gas and resource corporations have lodged a record number of claims against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – government attempts to halt global warming. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP