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What is your perceive our system of government works? It could be similar to this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, or the oligarchs behind them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. Such disputes are conducted behind closed doors. Differing from national judiciaries, these bodies provide no avenue for appeal or judicial review. The general public are unable to file a case to them, just as our government, including enterprises headquartered in this country. Access is granted exclusively to corporations based overseas.

Should an arbitration panel finds that a law or policy might diminish the corporation’s projected profits, it may order damages of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but compensation the panel members decide the company could potentially have made. The government could be forced to drop the legislation. It is discouraged from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as corporations learn from each other, and private equity fund legal actions for a share of a share of the takings. The result? National sovereignty and popular rule are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the decisions taken by elected bodies is that this provision has been written – absent public approval, and often in an atmosphere of profound opacity – within trade treaties.

A Real-World Case: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the high court. The presiding officer ruled that plans to excavate the first major coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The new government later cancelled the consent the previous administration had granted. Currently, this legal outcome could be compromised by an offshore tribunal answering to no one but the corporations bringing the case.

Last August, a firm whose beneficial owners are based in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the US capital was convened to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. Citizens have no clear indication how much this might be. Which individual is representing it against the UK administration? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a overseas corporation disputes it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coalmine case was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know little of the case so far, but it seems likely that he will utilise the tribunal to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously filed a claim against another European state on these grounds, demanding sixteen billion dollars: half that state's annual revenue. Among the counsel acting for him in that case? Cherie Blair, wife of the former British prime minister.

Legal experts argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

We were assured that these scenarios wouldn’t happen. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” An expert on this issue labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear such legal actions. Warnings that “when companies start to realise the authority they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with general mockery.

That prediction has now materialised. Recently, fossil fuel and extraction companies have lodged a historic level of claims against nations rich and poor, opposing – like the example of the Cumbrian coalmine – government attempts to stop global warming. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP