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What is your reckon our system of government works? Maybe something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills are enacted as law. The law is maintained by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Advent of Shadow Tribunals

In the modern era, international firms, and the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at private courts made up of commercial attorneys. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies allow no avenue for appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, or even companies operating from this country. The door is open only to businesses based overseas.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of vast sums, running into billions.

These awards represent not real financial harm but compensation the panel members conclude the company would perhaps have made. The government may have to abandon its policy. It will be deterred from introducing similar legislation along the same lines, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of disputes are being initiated, as firms observe each other, and investment funds finance suits in exchange for a portion of the settlements. The result? Sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the decisions made by parliaments is that this stipulation has been incorporated – without public consent, and often in conditions of extreme secrecy – inside international trade agreements.

A Real-World Case: The UK Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer found that plans to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the permission the previous administration had issued. Now, this success is under threat by an secret arbitration panel answering to only the corporations filing the suit.

During August, a corporate entity whose beneficial owners are based in the tax haven initiated proceedings against the UK government. The previous week a arbitration panel in the United States was established to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to proceed. We have no clear indication how much this might be. Which individual is representing it against the British government? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the domestic court supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Challenge

Simultaneously that the tribunal on the coalmine case was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case so far, but it seems likely that he’ll use the arbitration process to fight the penalties the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: an amount representing half government’s yearly budget. Included in the legal team on his side? a prominent lawyer, spouse of the ex-UK leader.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

Empty Promises and Mounting Costs

Politicians promised that these events were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all these agreements, declared: “We’ve signed investment treaty upon trade deal and there has never been a case in the past.” A consultant on this topic labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Warnings that “when companies grasp the influence bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction has now materialised. This year, oil and gas and resource corporations have initiated a historic level of claims against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to stop environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP