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What is your reckon our system of government works? Perhaps similar to this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. Not anymore.

The Rise of Shadow Tribunals

Nowadays, foreign corporations, or the oligarchs that control them, can sue governments for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these bodies grant no right of appeal or legal review. The general public cannot take a case to them, just as our government, or even enterprises operating from this country. Access is granted exclusively to businesses based overseas.

Should an arbitration panel rules that a law or policy may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

These awards constitute not actual losses but compensation the tribunal officials determine the company could potentially have made. The government could be forced to drop the legislation. It is hesitant to enacting future policies in that area, due to the risk of being sued.

A System Running Rampant

Record numbers of disputes are being initiated, as companies observe each other, and investment funds fund legal actions in return for a cut of the takings. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the rulings taken by elected bodies is that this stipulation has been written – absent public approval, and typically amid an atmosphere of total confidentiality – into trade treaties.

A Real-World Example: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the high court. The presiding officer determined that schemes to dig the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have zero effect on climate commitments. The new government later cancelled the licence the previous administration had issued. Today, this legal outcome is under threat by an foreign court reporting to exclusively the entities bringing the case.

During August, a firm whose ultimate owners are located in the tax haven filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was set up to consider the case.

The company is suing the UK for the profits it might have made if the mine had been allowed to proceed. We have no idea how much this might be. What legal team is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a foreign company disputes it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know little of the case at present, but it is highly possible that he’ll use the ISDS mechanism to fight the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has previously filed a claim against a small nation for this reason, seeking a colossal sum: equivalent to half of state's yearly budget. Among the lawyers on his side? Cherie Blair, wife of the former British prime minister.

Trade specialists argue that the EU’s delay in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these events were not possible. Years ago, a senior politician, advocating for the largest and riskiest of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this issue accused activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations had to worry about such legal actions. Cautionary notes that “as corporations start to realise the power they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning is now a reality. Recently, energy and resource corporations have initiated a historic level of cases against nations rich and poor, opposing – similar to the UK mine – state efforts to prevent climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP