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What is your reckon our system of government works? It could be along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that used to be how it used to work. No longer.

The Rise of Shadow Tribunals

In the modern era, international firms, along with the billionaires behind them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. The cases are conducted in secret. Differing from national judiciaries, these panels grant no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open only to corporations based overseas.

When a secret court finds that a government measure might diminish the corporation’s anticipated profits, it can award compensation of hundreds of millions, even billions.

These awards are based not on tangible damages but money the arbitrators conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It becomes discouraged from enacting future policies along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being brought, as companies observe each other, and private equity finance suits for a share of a share of the settlements. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the decisions taken by parliaments is that this clause has been incorporated – without public consent, and frequently under a climate of total confidentiality – within international trade agreements.

A Concrete Instance: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on national carbon targets. The incoming administration later cancelled the consent the Tories had issued. Currently, this victory is under threat by an secret arbitration panel answering to exclusively the corporations filing the suit.

During August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in the US capital was convened to consider the case.

The company is suing the UK for the money it might have made if the mine had been allowed to proceed. We have no idea how much this might be. What legal team is acting on its behalf in opposition to the state? An elected representative, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The administration makes a decision, the high court upholds it, then a international entity challenges it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Challenge

On the same day that the panel on the coalmine case was established, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case so far, but it appears probable that he’ll use the ISDS mechanism to fight the sanctions the UK enacted against him after the war in Ukraine. He has already started suing a small nation on these grounds, seeking sixteen billion dollars: half that government’s annual revenue. Included in the counsel on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over democratic administrations may be obstructing the money Ukraine critically depends on.

Empty Promises and Escalating Threats

The public was told that these scenarios could not occur. Years ago, a government leader, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” An expert on this issue accused campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries should be concerned by these lawsuits. Predictions that “once firms start to realise the influence they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That threat is now a reality. In the current period, fossil fuel and extraction companies have filed a historic level of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to prevent global warming. Corporations have to date won vast sums through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP