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Can you understand our system of government operates? Perhaps along the lines of this. We elect MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, along with the billionaires behind them, can sue governments for the regulations they pass, at private courts made up of commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these tribunals allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises based in this country. They are open exclusively to corporations based overseas.

Should an arbitration panel finds that a government measure could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, running into billions.

This compensation are based not on real financial harm but compensation the tribunal officials conclude the company might otherwise have made. The government might be compelled to drop the legislation. It will be discouraged from introducing similar legislation in that area, due to the risk of being sued.

A System Running Rampant

Historically high figures of disputes are being filed, as firms observe each other, and hedge funds fund legal actions in exchange for a share of the awards. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the decisions taken by elected bodies is that this provision has been inserted – without democratic mandate, and often in conditions of extreme secrecy – within international trade agreements.

A Concrete Example: The UK Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The judge determined that proposals to excavate the first deep coalmine in the UK for three decades, in northwest England, had been unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine could have no consequence on national carbon targets. The new government then withdrew the permission the previous administration had granted. Currently, this success could be compromised by an secret arbitration panel reporting to exclusively the companies filing the suit.

During August, a company whose ultimate owners are based in the offshore financial centre initiated proceedings against the UK government. Recently a arbitration panel in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to proceed. The public has no clear indication how much this might be. Who is serving as its counsel challenging the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The state enacts a policy, the high court validates it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament represents its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case to date, but it appears probable that he will utilise the arbitration process to contest the penalties the UK enacted against him after the invasion of Ukraine. He has already started suing a small nation with similar intent, seeking sixteen billion dollars: an amount representing half nation's yearly income. Among the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in utilising seized Russian assets as guarantee for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over elected governments could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

We were assured that such things wouldn’t happen. Previously, a senior politician, advocating for the biggest and most dangerous of all these agreements, told us: “The UK has signed investment treaty after trade deal and we have never seen a case in the past.” An adviser on this matter described activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “as corporations begin to understand the influence they’ve been granted, they will turn their attention from the weak nations to the strong ones” were dismissed with general mockery.

That prediction has come to pass. Recently, oil and gas and mining firms have lodged a historic level of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – government attempts to prevent climate breakdown. Firms have so far won $114bn via ISDS, of which oil majors have secured $84bn. That represents the combined GDP