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How do you understand our system of government functions? Perhaps similar to this. We elect MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. The law are enforced by the courts. Simple as that. Well, that’s how it once functioned. No longer.

The Emergence of Shadow Tribunals

Today, foreign corporations, and the oligarchs that control them, are able to litigate against governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held in secret. In contrast to domestic courts, these panels grant no right of appeal or legal review. You or I cannot take a case to them, just as our government, or even businesses operating from this country. The door is open exclusively to businesses operating from foreign soil.

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

This compensation represent not actual losses but compensation the tribunal officials determine the company might otherwise have made. The state might be compelled to abandon its policy. It is deterred from introducing similar legislation in that area, for fear of facing litigation.

A Process Spiralling Out of Control

Historically high figures of cases are being filed, as corporations take cues from each other, and private equity fund legal actions in exchange for a cut of the settlements. The outcome? Democratic sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the rulings taken by elected bodies is that this stipulation has been incorporated – without public consent, and often in a climate of extreme secrecy – within bilateral investment treaties.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The judge ruled that plans to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The new government later cancelled the licence the Tories had approved. Today, this victory is under threat by an offshore tribunal accountable to only the companies filing the suit.

In August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. Recently a arbitration panel in Washington DC was established to adjudicate on it.

The claimant is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this could amount to. Who is representing it in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a international entity contests it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coalmine case was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case at present, but it appears probable that he may employ the ISDS mechanism to challenge the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has already filed a claim against another European state for this reason, claiming sixteen billion dollars: an amount representing half state's yearly income. Part of the legal team on his side? the wife of a former prime minister, married to the former British prime minister.

Trade specialists argue that the EU’s delay in using frozen oligarchs' funds as security for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over democratic administrations may be obstructing the finance Ukraine urgently requires.

False Assurances and Mounting Risks

Politicians promised that these events could not occur. Years ago, a senior politician, promoting the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” A consultant on this matter accused critics of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about ISDS claims. Warnings that “as corporations grasp the authority they now possess, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction has now materialised. In the current period, oil and gas and extraction companies have lodged a historic level of claims against nations rich and poor, challenging – similar to the UK mine – official measures to halt climate breakdown. Corporations have thus far won vast sums via ISDS, of which oil majors have secured the majority. That represents the combined GDP