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What is your understand our system of government operates? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Yet, that’s how it operated in the past. Not anymore.

The Rise of Shadow Tribunals

Today, overseas companies, or the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these bodies allow no opportunity to appeal or legal review. You or I are unable to file a case to them, just as our government, including companies operating from this country. They are open solely for entities based overseas.

If a tribunal determines that a law or policy could harm the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, running into billions.

These awards constitute not actual losses but funds the arbitrators decide the company could potentially have made. The government may have to drop the legislation. It becomes hesitant to enacting future policies in that area, due to the risk of facing litigation.

A System Growing Exponentially

Record numbers of legal actions are being initiated, as firms take cues from each other, and investment funds fund legal actions in exchange for a share of the takings. The result? Democratic sovereignty and democratic governance are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the rulings made by parliaments is that this stipulation has been incorporated – without public consent, and typically amid a climate of total confidentiality – within trade treaties.

A Specific Example: The Whitehaven Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The judge ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the previous government, which had agreed to the questionable argument that the mine would have no consequence on our carbon budgets. The new government then withdrew the permission the previous administration had issued. Currently, this legal outcome could be compromised by an offshore tribunal accountable to only the companies bringing the case.

In August, a corporate entity whose final controllers reside in the tax haven lodged a claim challenging the UK government. Recently a arbitration panel in the United States was established to adjudicate on it.

This firm is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. The public has little idea how much this might be. What legal team is serving as its counsel in opposition to the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The state makes a decision, the domestic court supports it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the tribunal on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the penalties the UK levied against him subsequent to the war in Ukraine. He has filed a claim against another European state with similar intent, claiming a colossal sum: equivalent to half of government’s yearly income. Among the counsel representing him there? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in utilising seized state funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these scenarios could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” An adviser on this topic accused critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “as corporations grasp the power they now possess, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That warning is now a reality. Recently, oil and gas and mining firms have lodged a historic level of claims against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – government attempts to stop environmental catastrophe. Companies have thus far won vast sums through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP