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What is your perceive our system of government operates? It could be along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. Simple as that. However, that’s how it used to work. No longer.

The Emergence of Shadow Tribunals

Today, international firms, or the oligarchs that control them, can sue elected administrations for the policies they pass, at offshore tribunals made up of commercial attorneys. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises headquartered in this country. The door is open exclusively to entities operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of vast sums, even billions.

These sums constitute not actual losses but compensation the tribunal officials conclude the company might otherwise have made. The government might be compelled to rescind the measure. It is hesitant to passing future laws in that area, worried about incurring a lawsuit.

A Process Running Rampant

Record numbers of disputes are being initiated, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The result? National sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the choices enacted by parliaments is that this stipulation has been written – without public consent, and typically amid an atmosphere of total confidentiality – within international trade agreements.

A Real-World Instance: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for three decades, in northwest England, were unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the consent the Tories had approved. Currently, this success is under threat by an foreign court answering to no one but the corporations bringing the case.

Last August, a corporate entity whose ultimate owners reside in the offshore financial centre initiated proceedings versus the UK government. Recently a tribunal in the US capital was established to consider the case.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. The public has no idea how much this could amount to. What legal team is serving as its counsel in opposition to the state? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the high court upholds it, then a foreign company disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the mining lawsuit was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case so far, but it seems likely that he’ll use the tribunal to challenge the penalties the UK levied against him following the Russian aggression. He has already started suing a small nation on these grounds, seeking a colossal sum: an amount representing half state's annual revenue. Part of the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

Legal experts argue that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over sovereign states could be blocking the money Ukraine urgently requires.

Empty Promises and Growing Risks

We were assured that such things could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this topic described critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That threat has now materialised. This year, fossil fuel and resource corporations have lodged a historic level of suits against nations both wealthy and developing, challenging – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have so far won vast sums through ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP