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How do you understand our system of government functions? It could be something like this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. However, that’s how it once functioned. Those days are over.

The Rise of Shadow Tribunals

In the modern era, international firms, along with the wealthy individuals behind them, have the power to sue elected administrations for the policies they pass, at offshore tribunals staffed by corporate lawyers. The cases are conducted away from public scrutiny. Unlike our courts, these bodies provide no opportunity to appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even enterprises based in this country. They are open only to corporations based overseas.

When a secret court determines that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions, running into billions.

This compensation represent not actual losses but compensation the panel members decide the company would perhaps have made. The government could be forced to drop the legislation. It is discouraged from enacting future policies of a similar nature, worried about facing litigation.

A Process Running Rampant

Record numbers of disputes are being filed, as firms take cues from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? Democratic sovereignty and popular rule are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions made by legislatures is that this clause has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Concrete Case: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The presiding officer determined that plans to open the first major coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the permission the Tories had approved. Today, this victory is under threat by an offshore tribunal accountable to exclusively the entities bringing the case.

During August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit against the UK government. Last week a tribunal in the US capital was convened to consider the case.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had received permission to commence operations. Citizens have no idea how much this could amount to. Which individual is serving as its counsel against the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot the MP. The government makes a decision, the domestic court upholds it, then a foreign company challenges it through an secretive offshore tribunal, and a elected official acts on its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case to date, but it seems likely that he will utilise the ISDS mechanism to challenge the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has already initiated proceedings against another European state for this reason, claiming $16bn: half that state's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, married to the previous PM.

Trade specialists believe that the EU’s procrastination in utilising seized Russian assets as security for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over elected governments might be preventing the money Ukraine critically depends on.

False Assurances and Mounting Costs

Politicians promised that these events wouldn’t happen. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An adviser on this matter accused activists of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about such legal actions. Predictions that “when companies grasp the influence they now possess, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.

That warning is now a reality. In the current period, fossil fuel and mining firms have filed a record number of cases against nations both wealthy and developing, challenging – as in the case of the UK mine – official measures to prevent climate breakdown. Companies have so far won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP