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How do you understand our system of government works? Perhaps along the lines of this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Legislation are enforced by the courts. That's it. Well, that was how it operated in the past. No longer.

The Emergence of Shadow Tribunals

In the modern era, international firms, and the wealthy individuals behind them, have the power to sue governments for the policies they pass, at offshore tribunals made up of business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these bodies provide no opportunity to appeal or legal review. The general public are unable to file a case to them, just as our government, including companies operating from this country. Access is granted exclusively to entities based overseas.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, even billions.

These awards represent not actual losses but money the tribunal officials determine the company could potentially have made. The government might be compelled to drop the legislation. It will be deterred from introducing similar legislation of a similar nature, due to the risk of being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as firms learn from each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The consequence? Sovereignty and democracy are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the decisions enacted by legislatures is that this clause has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – into bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

A year ago, environmental campaigners secured a significant win at the senior court. The presiding officer determined that plans to open the first new deep coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The incoming administration later cancelled the consent the previous administration had issued. Currently, this legal outcome faces being overturned by an offshore tribunal accountable to no one but the corporations bringing the case.

During August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a dispute settlement body in Washington DC was convened to consider the case.

The claimant is litigating against the UK for the money it might have made if the mine had been allowed to commence operations. We have little idea how much this could amount to. What legal team is serving as its counsel challenging the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The state makes a decision, the high court supports it, then a foreign company challenges it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the sanctions the UK imposed on him subsequent to the Russian aggression. He has started suing Luxembourg on these grounds, seeking sixteen billion dollars: half that nation's yearly budget. Among the lawyers on his side? a prominent lawyer, married to the ex-UK leader.

Trade specialists contend that the EU’s procrastination in utilising seized Russian assets as collateral for its aid for Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over sovereign states might be preventing the funds Ukraine urgently requires.

False Assurances and Growing Risks

The public was told that such things could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An expert on this topic described campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries needed to fear such legal actions. Predictions that “when companies begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were met with widespread derision.

That warning has now materialised. In the current period, fossil fuel and extraction companies have lodged a record number of suits against nations rich and poor, contesting – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Corporations have so far won $114bn via ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP