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Can you perceive our system of government works? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills pass into law. Legislation is upheld by the courts. That's it. Well, that’s how it once functioned. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, along with the oligarchs that control them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted behind closed doors. In contrast to domestic courts, these tribunals grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, including enterprises headquartered in this country. The door is open solely for entities registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but funds the arbitrators conclude the company could potentially have made. The state could be forced to drop the legislation. It becomes hesitant to enacting future policies in that area, for fear of facing litigation.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a share of the settlements. The outcome? Sovereignty and democracy are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the rulings enacted by legislatures is that this clause has been written – without democratic mandate, and frequently under a climate of profound opacity – into international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

A year ago, activists secured a significant win at the High Court. The judge ruled that plans to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the consent the previous administration had approved. Today, this victory is under threat by an offshore tribunal reporting to only the corporations petitioning it.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre initiated proceedings against the UK government. The previous week a tribunal in the US capital was convened to adjudicate on it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had received permission to go ahead. The public has no idea how much this could amount to. Who is serving as its counsel against the British government? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The government makes a decision, the domestic court upholds it, then a international entity challenges it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

The Russian Lawsuit

On the same day that the panel on the coal mine dispute was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case to date, but it seems likely that he’ll use the tribunal to contest the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has already started suing another European state with similar intent, claiming sixteen billion dollars: half that nation's annual revenue. Among the legal team representing him there? Cherie Blair, spouse of the former British prime minister.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as security for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over sovereign states could be blocking the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that these events were not possible. Previously, a former prime minister, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An expert on this matter accused activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear ISDS claims. Warnings that “as corporations start to realise the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That warning has come to pass. This year, energy and resource corporations have lodged a record number of suits against nations rich and poor, opposing – as in the case of the UK mine – official measures to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That equates to the combined GDP