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What is your understand our democratic process operates? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that used to be how it used to work. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, or the wealthy individuals that control them, have the power to sue governments for the laws they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these bodies grant no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, including enterprises operating from this country. The door is open exclusively to businesses registered abroad.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

This compensation are based not on tangible damages but money the tribunal officials conclude the company might otherwise have made. The administration might be compelled to drop the legislation. It is hesitant to introducing similar legislation along the same lines, worried about facing litigation.

A System Running Rampant

Record numbers of legal actions are being brought, as firms observe each other, and private equity bankroll lawsuits for a share of a portion of the awards. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the decisions taken by legislatures is that this clause has been incorporated – without public consent, and typically amid conditions of extreme secrecy – into trade treaties.

A Specific Instance: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the High Court. The judge ruled that plans to open the first deep coalmine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine could have no consequence on our carbon budgets. The new government then withdrew the consent the Tories had issued. Today, this success is under threat by an offshore tribunal accountable to only the corporations bringing the case.

In August, a firm whose ultimate owners reside in the tax haven lodged a claim challenging the UK government. Last week a dispute settlement body in the United States was set up to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. The public has no idea how much this might be. What legal team is representing it in opposition to the UK administration? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a international entity challenges it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case to date, but it appears probable that he’ll use the ISDS mechanism to contest the penalties the UK imposed on him after the war in Ukraine. He has already initiated proceedings against a small nation with similar intent, seeking a colossal sum: equivalent to half of nation's yearly budget. Among the lawyers on his side? a prominent lawyer, spouse of the previous PM.

Legal experts contend that the EU’s procrastination in using frozen state funds as security for its financial support package stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the funds Ukraine desperately needs.

False Assurances and Escalating Threats

We were assured that such things could not occur. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has not been a case in the past.” An adviser on this matter labelled critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “when companies grasp the influence they’ve been granted, they will turn their attention from the weak nations to the developed economies” were dismissed with scepticism.

That threat has come to pass. In the current period, fossil fuel and extraction companies have lodged a historic level of cases against nations both wealthy and developing, contesting – similar to the UK mine – state efforts to halt global warming. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP