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What is your understand our system of government works? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that used to be how it used to work. No longer.

The Rise of Shadow Tribunals

Today, overseas companies, or the oligarchs who own them, are able to litigate against governments for the laws they pass, at private courts staffed by business advocates. Such disputes are held in secret. In contrast to domestic courts, these tribunals provide no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, including companies headquartered in this country. They are open only to corporations operating from foreign soil.

When a secret court determines that a law or policy might diminish the corporation’s expected profits, it can award damages of vast sums, potentially billions.

These sums are based not on tangible damages but funds the panel members decide the company could potentially have made. The government may have to drop the legislation. It becomes deterred from enacting future policies in that area, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of disputes are being brought, as companies learn from each other, and private equity bankroll lawsuits in return for a cut of the takings. The result? National sovereignty and democracy are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions made by parliaments is that this provision has been incorporated – absent public approval, and often in an atmosphere of total confidentiality – within bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The justice determined that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have zero effect on national carbon targets. The incoming administration later cancelled the licence the former government had approved. Now, this success faces being overturned by an offshore tribunal accountable to exclusively the companies petitioning it.

In August, a company whose ultimate owners are based in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in the United States was set up to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. Citizens have no idea how much this sum represents. Who is serving as its counsel challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case at present, but it appears probable that he’ll use the ISDS mechanism to fight 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, seeking $16bn: half that government’s yearly budget. Among the lawyers acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Costs

The public was told that such things were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has never been a case in the past.” A consultant on this issue accused activists of “alarmism … in reality, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “once firms grasp the authority bestowed upon them, they will shift their focus from the weak nations to the developed economies” were dismissed with general mockery.

That warning is now a reality. This year, fossil fuel and mining firms have lodged a historic level of suits against nations both wealthy and developing, opposing – similar to the UK mine – official measures to halt global warming. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP