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What is your perceive our system of government operates? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Statutes are enforced by the courts. End of story. Well, that was how it once functioned. No longer.

The Rise of Shadow Tribunals

In the modern era, international firms, along with the wealthy individuals behind them, have the power to sue governments for the regulations they pass, at private courts staffed by business advocates. Such disputes are conducted behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even businesses based in this country. The door is open solely for businesses operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it can award damages of vast sums, potentially billions.

This compensation are based not on actual losses but money the panel members determine the company could potentially have made. The government may have to rescind the measure. It is hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being filed, as companies take cues from each other, and investment funds fund legal actions in exchange for a share of the settlements. The result? Sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the decisions taken by parliaments is that this clause has been written – without democratic mandate, and typically amid an atmosphere of profound opacity – into trade treaties.

A Concrete Case: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The presiding officer found that proposals to dig the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine could have no impact on climate commitments. The Labour government then withdrew the permission the former government had granted. Now, this success is under threat by an secret arbitration panel answering to only the entities bringing the case.

In August, a firm whose beneficial owners reside in the tax haven filed a lawsuit challenging the UK government. Last week a tribunal in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. Who is acting on its behalf in opposition to the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court validates it, then a international entity disputes it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coalmine case was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are little of the case to date, but it appears probable that he’ll use the ISDS mechanism to contest the penalties the UK levied against him after the war in Ukraine. He has started suing another European state on these grounds, seeking sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the lawyers on his side? a prominent lawyer, wife of the previous PM.

International law scholars believe that the EU’s hesitation in using frozen state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Threats

The public was told that such things wouldn’t happen. Years ago, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” An adviser on this matter described critics of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “once firms grasp the authority they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with general mockery.

That warning has now materialised. This year, fossil fuel and extraction companies have lodged a record number of claims against nations both wealthy and developing, challenging – like the example of the UK mine – official measures to prevent environmental catastrophe. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP