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How do you reckon our system of government functions? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. That's it. However, that’s how it used to work. Those days are over.

The Emergence of Shadow Tribunals

Today, foreign corporations, or the billionaires who own them, can sue governments for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these panels provide no right of appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even companies headquartered in this country. Access is granted solely for entities registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s projected profits, it has the power to grant damages of vast sums, potentially billions.

This compensation constitute not real financial harm but funds the tribunal officials determine the company could potentially have made. The administration may have to abandon its policy. It will be deterred from enacting future policies along the same lines, worried about facing litigation.

A Process Running Rampant

Historically high figures of cases are being filed, as companies observe each other, and investment funds bankroll lawsuits in return for a portion of the takings. The result? National sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the rulings enacted by parliaments is that this provision has been written – without public consent, and often in conditions of total confidentiality – into international trade agreements.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, activists won a great victory at the high court. The justice determined that proposals to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The incoming administration then withdrew the permission the former government had approved. Today, this victory could be compromised by an foreign court reporting to no one but the entities bringing the case.

Last August, a company whose ultimate owners are located in the Cayman Islands lodged a claim versus the UK government. Last week a tribunal in Washington DC was established to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. Citizens have no clear indication how much this might be. Who is acting on its behalf challenging the state? An elected representative, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the domestic court upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case so far, but it appears probable that he will utilise the arbitration process to contest the restrictions the UK levied against him subsequent to the war in Ukraine. He has already started suing Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of state's yearly income. Part of the legal team acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as guarantee for its financial support package stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Mounting Threats

We were assured that these events wouldn’t happen. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” A consultant on this topic labelled campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies start to realise the power they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat is now a reality. This year, fossil fuel and mining firms have initiated a record number of claims against nations both wealthy and developing, opposing – as in the case of the UK mine – government attempts to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have secured the majority. That equates to the combined GDP