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Can you reckon our system of government operates? It could be similar to this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that’s how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

Today, foreign corporations, and the oligarchs behind them, are able to litigate against governments for the policies they pass, at private courts made up of business advocates. Such disputes take place in secret. In contrast to domestic courts, these panels grant no right of appeal or legal review. The general public are unable to file a case to them, just as our government, including businesses operating from this country. Access is granted only to corporations based overseas.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it may order compensation of hundreds of millions, potentially billions.

These awards are based not on real financial harm but funds the panel members conclude the company could potentially have made. The administration could be forced to rescind the measure. It is deterred from passing future laws along the same lines, worried about facing litigation.

A System Growing Exponentially

Record numbers of cases are being filed, as companies take cues from each other, and hedge funds fund legal actions in return for a portion of the takings. The consequence? National sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the rulings taken by elected bodies is that this clause has been written – without public consent, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

A year ago, activists won a great victory at the senior court. The judge determined that schemes to dig 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 accepted the extraordinary assertion that the mine would have no impact on our carbon budgets. The incoming administration subsequently revoked the consent the previous administration had approved. Currently, this victory faces being overturned by an foreign court accountable to only the entities petitioning it.

During August, a company whose ultimate owners reside in the Cayman Islands filed a lawsuit against the UK government. Last week a tribunal in the US capital was established to consider the case.

The claimant is litigating against the UK for the money it could have earned if the mine had received permission to commence operations. We have no idea how much this might be. Which individual is representing it against the state? A sitting MP, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a foreign company challenges it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coalmine case was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case to date, but it appears probable that he’ll use the tribunal to challenge the sanctions the UK enacted against him following the invasion of Ukraine. He has filed a claim against another European state with similar intent, seeking sixteen billion dollars: half that government’s yearly budget. Part of the counsel representing him there? Cherie Blair, married to the ex-UK leader.

Legal experts contend that the EU’s hesitation in using frozen state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine urgently requires.

False Assurances and Growing Costs

The public was told that these scenarios were not possible. Previously, a senior politician, advocating for the most significant and hazardous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An expert on this topic labelled critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “once firms start to realise the authority they’ve been granted, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That threat is now a reality. This year, oil and gas and mining firms have initiated a record number of suits against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to prevent global warming. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP