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Can you perceive our system of government operates? It could be similar to this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. However, that’s how it used to work. No longer.

The Rise of Shadow Tribunals

Today, international firms, along with the wealthy individuals who own them, have the power to sue governments for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases are conducted in secret. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. The general public cannot take a case to them, nor can our government, including companies based in this country. They are open exclusively to businesses based overseas.

When a secret court rules that a legislative action could harm the corporation’s projected profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation constitute not tangible damages but compensation the panel members conclude the company could potentially have made. The government might be compelled to abandon its policy. It will be hesitant to passing future laws of a similar nature, due to the risk of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being brought, as firms learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the takings. The outcome? Sovereignty and democracy are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the choices made by elected bodies is that this provision has been incorporated – without democratic mandate, and typically amid an atmosphere of profound opacity – within trade treaties.

A Concrete Example: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the high court. The presiding officer determined that plans to excavate the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had zero effect on national carbon targets. The Labour government subsequently revoked the permission the previous administration had granted. Today, this victory faces being overturned by an foreign court answering to exclusively the companies petitioning it.

In August, a corporate entity whose beneficial owners are based in the tax haven lodged a claim against the UK government. Last week a dispute settlement body in the United States was established to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. Which individual is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a foreign company contests it through an undemocratic private court, and a elected official works for its behalf.

A Sanctions Lawsuit

On the same day that the court on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case so far, but it appears probable that he will utilise the tribunal to contest the sanctions the UK levied against him after the invasion of Ukraine. He has previously started suing Luxembourg for this reason, demanding a colossal sum: an amount representing half state's annual revenue. Part of the counsel on his side? a prominent lawyer, wife of the previous PM.

Legal experts believe that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

We were assured that these scenarios wouldn’t happen. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “Britain has agreed to investment treaty upon trade deal and there has not been a problem in the past.” An adviser on this issue accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations begin to understand the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by general mockery.

That threat has now materialised. Recently, oil and gas and mining firms have filed a unprecedented number of claims against nations rich and poor, challenging – similar to the Whitehaven project – official measures to prevent climate breakdown. Corporations have to date won $114bn via ISDS, of which energy giants have secured the majority. That equates to the combined GDP