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How do you understand our system of government functions? It could be something like this. We elect MPs. They vote on bills. When a majority is secured, the bills become law. Legislation are enforced by the courts. End of story. Yet, that’s how it operated in the past. No longer.

The Emergence of Shadow Tribunals

In the modern era, international firms, or the oligarchs that control them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of corporate lawyers. Such disputes are held in secret. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, or even businesses based in this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court finds that a government measure could harm the corporation’s anticipated profits, it may order compensation of vast sums, potentially billions.

These awards constitute not tangible damages but funds the tribunal officials conclude the company would perhaps have made. The government may have to abandon its policy. It will be hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of legal actions are being initiated, as corporations take cues from each other, and investment funds fund legal actions for a share of a cut of the awards. The result? Sovereignty and popular rule are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the rulings enacted by parliaments is that this stipulation has been written – without public consent, and frequently under conditions of profound opacity – into bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the High Court. The judge found that plans to dig the first major coal mine in the UK for three decades, in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The Labour government then withdrew the consent the previous administration had granted. Now, this legal outcome is under threat by an secret arbitration panel accountable to only the companies petitioning it.

In August, a company whose final controllers reside in the Cayman Islands filed a lawsuit versus the UK government. The previous week a tribunal in the US capital was set up to hear it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. The public has little idea how much this might be. Who is serving as its counsel against the state? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The administration makes a decision, the domestic court supports it, then a foreign company challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case at present, but it appears probable that he’ll use the arbitration process to contest the sanctions the UK levied against him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, demanding sixteen billion dollars: half that nation's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as security for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine critically depends on.

False Assurances and Mounting Risks

The public was told that these scenarios were not possible. Previously, a former prime minister, advocating for the most significant and hazardous of all investment pacts, told us: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this issue described campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That prediction is now a reality. This year, fossil fuel and mining firms have initiated a record number of claims against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Companies have so far won $114bn through ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP