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What is your perceive our system of government works? It could be something like this. We elect MPs. They vote on bills. When a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that used to be how it used to work. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, international firms, and the oligarchs that control them, are able to litigate against governments for the laws they pass, at private courts composed of business advocates. The cases are held in secret. In contrast to domestic courts, these tribunals allow no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies based in this country. They are open only to corporations registered abroad.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, running into billions.

This compensation are based not on tangible damages but money the tribunal officials decide the company might otherwise have made. The government may have to drop the legislation. It is hesitant to passing future laws of a similar nature, for fear of being sued.

A Process Running Rampant

Record numbers of disputes are being filed, as firms observe each other, and private equity fund legal actions in return for a portion of the takings. The consequence? Democratic sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the rulings made by elected bodies is that this provision has been inserted – without democratic mandate, and typically amid a climate of total confidentiality – within trade treaties.

A Specific Case: The UK Coalmine

Last year, a conservation group secured a significant win at the senior court. The judge ruled that schemes to open the first new deep coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had agreed to the questionable argument that the mine would have no impact on our carbon budgets. The new government later cancelled the permission the previous administration had granted. Currently, this victory could be compromised by an offshore tribunal accountable to exclusively the entities bringing the case.

In August, a corporate entity whose beneficial owners are located in the offshore financial centre initiated proceedings against the UK government. Recently a dispute settlement body in Washington DC was set up to adjudicate on it.

The company is litigating against the UK for the money it would have generated if the mine had received permission to go ahead. We have no idea how much this might be. What legal team is representing it challenging the state? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a international entity challenges it through an undemocratic private court, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the panel on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he will utilise the tribunal to challenge the penalties the UK imposed on him subsequent to the war in Ukraine. He has already filed a claim against a small nation on these grounds, demanding sixteen billion dollars: equivalent to half of state's yearly budget. Part of the lawyers on his side? the wife of a former prime minister, married to the ex-UK leader.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as security 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, undemocratic power over elected governments could be blocking the finance Ukraine urgently requires.

Empty Promises and Growing Costs

We were assured that such things were not possible. In 2014, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” A consultant on this issue accused campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms begin to understand the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning has now materialised. This year, oil and gas and resource corporations have filed a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Firms have to date won vast sums through ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP