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How do you reckon our system of government operates? Maybe similar to this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. End of story. Well, that used to be how it used to work. Those days are over.

The Advent of Shadow Tribunals

In the modern era, overseas companies, and the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by corporate lawyers. The cases are held in secret. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. You or I are barred from bringing a case to them, nor can our government, or even enterprises based in this country. The door is open solely for businesses based overseas.

If a tribunal finds that a government measure could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These sums constitute not tangible damages but money the tribunal officials decide the company would perhaps have made. The state could be forced to abandon its policy. It will be discouraged from enacting future policies in that area, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of legal actions are being initiated, as firms take cues from each other, and investment funds finance suits in return for a cut of the takings. The outcome? National sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the decisions taken by elected bodies is that this provision has been incorporated – without democratic mandate, and typically amid a climate of profound opacity – inside international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

A year ago, activists won a great victory at the high court. The presiding officer determined that plans to open the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The incoming administration later cancelled the consent the Tories had issued. Currently, this legal outcome faces being overturned by an foreign court accountable to exclusively the companies bringing the case.

During August, a firm whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. Last week a tribunal in the US capital was established to hear it.

The claimant is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. The public has no idea how much this could amount to. Who is serving as its counsel challenging the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

A Sanctions Challenge

On the same day that the panel on the mining lawsuit was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case so far, but it seems likely that he may employ the arbitration process to contest the sanctions the UK enacted against him after the Russian aggression. He has previously initiated proceedings against another European state for this reason, claiming sixteen billion dollars: half that government’s yearly income. Among the counsel on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars contend that the EU’s procrastination in utilising seized state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Threats

We were assured that these scenarios wouldn’t happen. In 2014, a former prime minister, advocating for the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” A consultant on this matter accused activists of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “when companies begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That warning has come to pass. Recently, oil and gas and extraction companies have filed a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to halt global warming. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP