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Can you reckon our system of government works? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. That's it. Well, that was how it used to work. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, along with the oligarchs that control them, can sue nation states for the policies they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are conducted behind closed doors. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. The general public are unable to file a case to them, just as our government, or even businesses based in this country. They are open exclusively to corporations operating from foreign soil.

If a tribunal finds that a law or policy might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

This compensation constitute not actual losses but funds the arbitrators decide the company would perhaps have made. The state may have to abandon its policy. It becomes discouraged from enacting future policies along the same lines, for fear of facing litigation.

A System Growing Exponentially

Record numbers of cases are being brought, as companies learn from each other, and private equity finance suits for a share of a share of the settlements. The outcome? National sovereignty and popular rule are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the decisions made by legislatures is that this stipulation has been inserted – without democratic mandate, and often in a climate of extreme secrecy – within trade treaties.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The judge determined that plans to excavate the first new deep coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on our carbon budgets. The new government later cancelled the consent the Tories had granted. Currently, this victory is under threat by an offshore tribunal answering to exclusively the companies bringing the case.

In August, a company whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. Recently a dispute settlement body in Washington DC was convened to hear it.

The claimant is litigating against the UK for the money it could have earned if the mine had received permission to go ahead. The public has no idea how much this might be. Which individual is acting on its behalf against the state? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the domestic court validates it, then a foreign company disputes it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he’ll use the ISDS mechanism to contest the restrictions the UK levied against him after the war in Ukraine. He has previously initiated proceedings against a small nation with similar intent, seeking $16bn: half that nation's yearly income. Included in the counsel acting for him in that case? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s procrastination in using frozen state funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, advocating for the most significant and hazardous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this issue labelled activists of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “when companies start to realise the influence they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat is now a reality. In the current period, oil and gas and mining firms have lodged a unprecedented number of claims against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to prevent global warming. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured the majority. That equates to the combined GDP