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What is your perceive our system of government operates? It could be something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

In the modern era, international firms, or the billionaires that control them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held behind closed doors. Differing from national judiciaries, these panels grant no right of appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even companies based in this country. They are open solely for corporations operating from foreign soil.

When a secret court rules that a legislative action may compromise the corporation’s projected profits, it may order damages of hundreds of millions of pounds, even billions.

These awards are based not on actual losses but compensation the tribunal officials conclude the company could potentially have made. The state could be forced to abandon its policy. It will be deterred from introducing similar legislation along the same lines, worried about facing litigation.

A System Spiralling Out of Control

Record numbers of disputes are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a portion of the settlements. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the choices made by legislatures is that this provision has been incorporated – absent public approval, and often in a climate of extreme secrecy – inside trade treaties.

A Specific Instance: The UK Coalmine

A year ago, a conservation group won a great victory at the high court. The justice ruled that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no impact on national carbon targets. The Labour government then withdrew the licence the Tories had granted. Today, this success is under threat by an foreign court reporting to exclusively the corporations filing the suit.

In August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim against the UK government. Last week a arbitration panel in the United States was established to consider the case.

This firm is litigating against the UK for the profits it could have earned if the mine had received permission to commence operations. Citizens have no clear indication how much this could amount to. What legal team is representing it challenging the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot the MP. The state makes a decision, the national judiciary validates it, then a foreign company challenges it through an secretive offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the court on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case so far, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK levied against him following the war in Ukraine. He has initiated proceedings against a small nation on these grounds, seeking $16bn: equivalent to half of government’s yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

International law scholars argue that the EU’s delay in using frozen Russian assets as security 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 remarkable, secretive influence over democratic administrations may be obstructing the funds Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that such things wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” An expert on this topic labelled critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “when companies start to realise the authority they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That threat has now materialised. This year, energy and resource corporations have lodged a unprecedented number of suits against nations rich and poor, opposing – similar to the Cumbrian coalmine – state efforts to stop global warming. Firms have so far won vast sums through ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP