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What is your understand our democratic process operates? It could be similar to this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. The law is upheld by the courts. End of story. However, that’s how it used to work. No longer.

The Rise of Shadow Tribunals

Nowadays, overseas companies, and the oligarchs behind them, are able to litigate against nation states for the regulations they pass, at private courts made up of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or legal review. You or I cannot take a case to them, nor can our government, including businesses based in this country. The door is open solely for corporations registered abroad.

Should an arbitration panel determines that a government measure may compromise the corporation’s projected profits, it may order compensation of hundreds of millions, even billions.

These awards are based not on actual losses but money the arbitrators determine the company might otherwise have made. The state might be compelled to rescind the measure. It is deterred from passing future laws along the same lines, for fear of incurring a lawsuit.

A System Running Rampant

Record numbers of legal actions are being brought, as corporations observe each other, and private equity bankroll lawsuits for a share of a share of the settlements. The consequence? National sovereignty and popular rule are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings taken by elected bodies is that this provision has been inserted – without public consent, and typically amid conditions of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

A year ago, activists secured a significant win at the high court. The judge ruled that plans to open the first new deep coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The Labour government later cancelled the consent the former government had approved. Now, this legal outcome is under threat by an offshore tribunal accountable to only the companies bringing the case.

In August, a company whose beneficial owners are based in the Cayman Islands initiated proceedings against the UK government. Last week a dispute settlement body in the United States was established to consider the case.

This firm is litigating against the UK for the money it could have earned if the mine had been allowed to go ahead. We have no idea how much this could amount to. Who is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the high court supports it, then a foreign company disputes it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the Russian aggression. He has previously filed a claim against another European state for this reason, demanding sixteen billion dollars: an amount representing half state's yearly budget. Included in the counsel representing him there? a prominent lawyer, spouse of the former British prime minister.

Legal experts argue that the EU’s procrastination in using frozen Russian assets as collateral for its financial support package arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over democratic administrations could be blocking the funds Ukraine critically depends on.

Empty Promises and Escalating Risks

We were assured that such things wouldn’t happen. In 2014, a former prime minister, championing the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this matter described campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms begin to understand the authority they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were met with widespread derision.

That threat has now materialised. This year, oil and gas and extraction companies have filed a record number of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – state efforts to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained the majority. That equates to the combined GDP