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How do you understand our system of government operates? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills become law. Statutes is upheld by the courts. End of story. However, that was how it operated in the past. No longer.

The Rise of Shadow Tribunals

Today, overseas companies, or the wealthy individuals that control them, can sue elected administrations for the regulations they pass, at private courts made up of corporate lawyers. The cases take place behind closed doors. In contrast to domestic courts, these tribunals allow no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, including businesses based in this country. They are open only to entities registered abroad.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of vast sums, running into billions.

These awards represent not actual losses but money the arbitrators determine the company would perhaps have made. The government may have to abandon its policy. It becomes discouraged from passing future laws along the same lines, for fear of being sued.

A Mechanism Growing Exponentially

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 share of the awards. The outcome? Democratic sovereignty and democracy are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the choices made by elected bodies is that this provision has been inserted – without democratic mandate, and typically amid a climate of profound opacity – into trade treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The judge found that schemes to dig the first deep coalmine in the UK for 30 years, in northwest England, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The Labour government subsequently revoked the consent the Tories had approved. Now, this success could be compromised by an foreign court answering to no one but the entities bringing the case.

During August, a company whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Last week a dispute settlement body in the United States was set up to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. We have little idea how much this might be. Which individual is representing it in opposition to the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the high court validates it, then a foreign company challenges it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case to date, but it seems likely that he may employ the tribunal to fight the sanctions the UK imposed on him after the invasion of Ukraine. He has already started suing another European state on these grounds, seeking sixteen billion dollars: equivalent to half of state's yearly budget. Among the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized Russian assets as security for its financial support package is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over sovereign states could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Threats

Politicians promised that such things could not occur. Previously, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this topic labelled activists of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the authority they now possess, they will turn their attention from the weak nations to the strong ones” were dismissed with scepticism.

That threat is now a reality. This year, fossil fuel and resource corporations have filed a record number of claims against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP