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How do you perceive our political system operates? Maybe along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. End of story. However, that was how it used to work. No longer.

The Advent of Shadow Tribunals

Today, overseas companies, along with the wealthy individuals behind them, can sue nation states for the regulations they pass, at offshore tribunals composed of business advocates. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even companies based in this country. The door is open only to entities operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These sums constitute not actual losses but funds the tribunal officials decide the company might otherwise have made. The state could be forced to rescind the measure. It will be hesitant to enacting future policies of a similar nature, for fear of being sued.

A Process Growing Exponentially

Unprecedented levels of cases are being brought, as corporations observe each other, and private equity fund legal actions in exchange for a portion of the takings. The outcome? National sovereignty and democratic governance are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the decisions made by legislatures is that this stipulation has been inserted – absent public approval, and often in a climate of total confidentiality – into trade treaties.

A Concrete Case: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer found that proposals to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have no impact on climate commitments. The new government subsequently revoked the consent the previous administration had issued. Today, this legal outcome could be compromised by an offshore tribunal answering to only the entities bringing the case.

In August, a firm whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had been permitted to go ahead. Citizens have no clear indication how much this could amount to. What legal team is serving as its counsel against the state? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court validates it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament represents its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was convened, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case so far, but it is highly possible that he’ll use the arbitration process to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously filed a claim against another European state with similar intent, seeking $16bn: half that nation's yearly income. Among the legal team representing him there? a prominent lawyer, married to the ex-UK leader.

Trade specialists contend that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

False Assurances and Growing Costs

We were assured that such things were not possible. In 2014, a senior politician, promoting the most significant and hazardous of all such treaties, stated: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” An adviser on this topic labelled campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “once firms grasp the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with general mockery.

That warning has come to pass. This year, fossil fuel and mining firms have lodged a historic level of claims against nations both wealthy and developing, contesting – like the example of the UK mine – state efforts to stop environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP