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Can you understand our system of government works? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. End of story. Well, that’s how it used to work. Those days are over.

The Advent of Shadow Tribunals

In the modern era, overseas companies, along with the oligarchs behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by business advocates. These proceedings are held away from public scrutiny. Differing from national judiciaries, these bodies grant no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, including businesses operating from this country. Access is granted solely for businesses based overseas.

If a tribunal finds that a law or policy may compromise the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but compensation the tribunal officials conclude the company might otherwise have made. The state could be forced to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Process Running Rampant

Record numbers of disputes are being brought, as corporations learn from each other, and private equity fund legal actions in return for a cut of the takings. The consequence? National sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the rulings made by legislatures is that this clause has been written – without democratic mandate, and typically amid an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Example: The Whitehaven Coalmine

Last year, a conservation group achieved a major legal triumph at the High Court. The presiding officer determined that plans to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have no consequence on national carbon targets. The new government subsequently revoked the permission the former government had granted. Today, this success is under threat by an secret arbitration panel reporting to only the companies filing the suit.

Last August, a corporate entity whose final controllers reside in the tax haven lodged a claim against the UK government. Recently a tribunal in Washington DC was established to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Who is serving as its counsel challenging the British government? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot the MP. The state enacts a policy, the high court upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it seems likely that he may employ the arbitration process to challenge the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has started suing a small nation on these grounds, demanding sixteen billion dollars: half that government’s yearly budget. Part of the counsel on his side? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s delay in using frozen Russian assets as collateral for its financial support package stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine critically depends on.

Empty Promises and Growing Threats

We were assured that such things could not occur. Years ago, a government leader, championing the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” A consultant on this topic described critics of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies begin to understand the authority they now possess, they will redirect their efforts from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction has come to pass. Recently, oil and gas and extraction companies have lodged a record number of cases against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – state efforts to halt global warming. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP