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What is your understand our political system operates? Perhaps along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills become law. The law are enforced by the courts. End of story. However, that’s how it used to work. Not anymore.

The Rise of Shadow Tribunals

Today, foreign corporations, or the billionaires who own them, can sue governments for the laws they pass, at private courts made up of corporate lawyers. The cases are conducted away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. The general public cannot take a case to them, just as our government, including companies based in this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

These awards constitute not real financial harm but money the arbitrators determine the company might otherwise have made. The administration might be compelled to drop the legislation. It is hesitant to passing future laws in that area, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of cases are being initiated, as firms take cues from each other, and private equity fund legal actions for a share of a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the choices taken by parliaments is that this clause has been incorporated – without democratic mandate, and often in a climate of total confidentiality – into trade treaties.

A Real-World Case: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The justice found that schemes to excavate the first new deep coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the permission the previous administration had approved. Now, this legal outcome faces being overturned by an offshore tribunal reporting to no one but the corporations bringing the case.

During August, a firm whose final controllers are located in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in Washington DC was set up to adjudicate on it.

The company is litigating against the UK for the profits it could have earned if the mine had been allowed to proceed. We have no clear indication how much this could amount to. What legal team is acting on its behalf in opposition to the state? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a international entity contests it through an secretive private court, and a sitting MP represents its behalf.

A Sanctions Challenge

On the same day that the court on the coalmine case was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case at present, but it seems likely that he will utilise the ISDS mechanism to contest the restrictions the UK imposed on him after the war in Ukraine. He has started suing a small nation with similar intent, seeking sixteen billion dollars: half that state's annual revenue. Part of the counsel acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s hesitation in using frozen state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that these scenarios wouldn’t happen. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this issue described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear these lawsuits. Predictions that “when companies grasp the influence they now possess, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. In the current period, oil and gas and mining firms have lodged a historic level of suits against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to halt climate breakdown. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP