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What is your understand our democratic process works? Maybe similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills pass into law. The law are enforced by the courts. That's it. Well, that was how it once functioned. Those days are over.

The Rise of Shadow Tribunals

In the modern era, international firms, or the oligarchs behind them, are able to litigate against nation states for the laws they pass, at private courts composed of corporate lawyers. Such disputes take place behind closed doors. In contrast to domestic courts, these tribunals grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, including businesses headquartered in this country. They are open exclusively to businesses operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but funds the panel members determine the company would perhaps have made. The administration may have to drop the legislation. It becomes discouraged from enacting future policies in that area, due to the risk of being sued.

A System Running Rampant

Unprecedented levels of legal actions are being brought, as companies observe each other, and hedge funds finance suits for a share of a share of the takings. The outcome? National sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the rulings taken by elected bodies is that this stipulation has been written – absent public approval, and often in an atmosphere of extreme secrecy – inside trade treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge determined that proposals to open the first deep coalmine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have no consequence on our carbon budgets. The Labour government then withdrew the licence the former government had approved. Now, this legal outcome is under threat by an secret arbitration panel accountable to no one but the companies filing the suit.

During August, a firm whose final controllers are located in the offshore financial centre lodged a claim against the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to commence operations. We have no idea how much this might be. Which individual is acting on its behalf against the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot the MP. The administration passes a law, the domestic court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case to date, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has already filed a claim against another European state for this reason, claiming sixteen billion dollars: an amount representing half state's annual revenue. Included in the lawyers on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised state funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over sovereign states could be blocking the funds Ukraine critically depends on.

Empty Promises and Growing Costs

We were assured that these scenarios were not possible. In 2014, a government leader, promoting the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade deal after trade deal and there has never been a case in the past.” A consultant on this topic described activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms start to realise the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction has now materialised. Recently, energy and resource corporations have initiated a unprecedented number of claims against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – official measures to halt global warming. Corporations have thus far won vast sums through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP