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How do you understand our system of government works? Maybe along the lines of this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. That's it. Well, that was how it used to work. No longer.

The Rise of Shadow Tribunals

In the modern era, foreign corporations, and the wealthy individuals behind them, can sue governments for the policies they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held in secret. Differing from national judiciaries, these tribunals grant no right of appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even businesses operating from this country. They are open solely for entities registered abroad.

Should an arbitration panel finds that a law or policy could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These awards are based not on real financial harm but money the panel members conclude the company could potentially have made. The state may have to rescind the measure. It becomes discouraged from introducing similar legislation in that area, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as firms learn from each other, and investment funds finance suits in return for a cut of the takings. The consequence? National sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the decisions taken by legislatures is that this stipulation has been inserted – absent public approval, and typically amid conditions of total confidentiality – into international trade agreements.

A Specific Example: The Whitehaven Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The justice determined that proposals to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine could have no impact on climate commitments. The new government then withdrew the licence the Tories had issued. Now, this victory could be compromised by an offshore tribunal accountable to only the corporations petitioning it.

Last August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim challenging the UK government. Last week a tribunal in Washington DC was convened to consider the case.

The claimant is suing the UK for the money it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the national judiciary supports it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

The Russian Case

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it is highly possible that he will utilise the tribunal to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, demanding a colossal sum: equivalent to half of nation's yearly budget. Part of the lawyers acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts argue that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that such things were not possible. In 2014, a senior politician, championing the largest and riskiest of all such treaties, stated: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this matter described critics of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “as corporations grasp the influence they’ve been granted, they will shift their focus from the weak nations to the developed economies” were met with scepticism.

That prediction has come to pass. Recently, fossil fuel and resource corporations have initiated a record number of suits against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to prevent global warming. Firms have thus far won vast sums by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP