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How do you perceive our political system functions? It could be something like this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that was how it used to work. No longer.

The Advent of Shadow Tribunals

In the modern era, foreign corporations, and the oligarchs who own them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by business advocates. These proceedings take place in secret. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. The general public are unable to file a case to them, nor can our government, including businesses operating from this country. Access is granted only to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it may order compensation of hundreds of millions, potentially billions.

These sums are based not on real financial harm but funds the arbitrators conclude the company might otherwise have made. The state could be forced to drop the legislation. It will be deterred from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as firms take cues from each other, and investment funds fund legal actions for a share of a cut of the takings. The consequence? National sovereignty and democracy are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the choices made by legislatures is that this provision has been written – without democratic mandate, and typically amid an atmosphere of extreme secrecy – into bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge determined that plans to dig the first new deep coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The new government subsequently revoked the licence the previous administration had approved. Today, this legal outcome could be compromised by an offshore tribunal reporting to no one but the companies bringing the case.

Last August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in Washington DC was set up to hear it.

This firm is suing the UK for the profits it might have made if the mine had received permission to commence operations. The public has little idea how much this sum represents. Which individual is representing it challenging the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The government makes a decision, the high court upholds it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coalmine case was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case so far, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK imposed on him after the invasion of Ukraine. He has previously started suing Luxembourg with similar intent, demanding a colossal sum: an amount representing half government’s yearly budget. Included in the legal team representing him there? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars argue that the EU’s procrastination in using frozen Russian assets as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over elected governments might be preventing the finance Ukraine critically depends on.

False Assurances and Growing Costs

We were assured that such things were not possible. In 2014, a former prime minister, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An expert on this matter accused campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “once firms grasp the power they now possess, they will turn their attention from the weak nations to the developed economies” were met with scepticism.

That prediction has now materialised. Recently, fossil fuel and extraction companies have initiated a record number of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have thus far won vast sums via ISDS, of which oil majors have obtained the majority. That represents the combined GDP