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What is your understand our system of government operates? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation is maintained by the courts. End of story. However, that’s how it once functioned. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, international firms, and the wealthy individuals that control them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place in secret. In contrast to domestic courts, these panels grant no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, including companies based in this country. They are open solely for corporations operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, even billions.

These sums constitute not actual losses but money the arbitrators determine the company would perhaps have made. The administration could be forced to rescind the measure. It is hesitant to enacting future policies in that area, worried about facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies learn from each other, and hedge funds fund legal actions for a share of a share of the awards. The outcome? Democratic sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the choices taken by parliaments is that this provision has been incorporated – without public consent, and typically amid an atmosphere of total confidentiality – within international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Last year, activists achieved a major legal triumph at the High Court. The judge determined that proposals to dig the first new deep coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the permission the Tories had approved. Today, this victory faces being overturned by an foreign court accountable to no one but the entities bringing the case.

Last August, a company whose final controllers reside in the offshore financial centre lodged a claim against the UK government. Last week a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have no clear indication how much this could amount to. Who is representing it challenging the UK administration? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The state enacts a policy, the high court upholds it, then a foreign company disputes it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coalmine case was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he will utilise the arbitration process to fight the sanctions the UK imposed on him following the Russian aggression. He has filed a claim against Luxembourg for this reason, seeking a colossal sum: half that government’s annual revenue. Part of the legal team on his side? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over sovereign states could be blocking the finance Ukraine critically depends on.

False Assurances and Escalating Costs

We were assured that these events could not occur. In 2014, a government leader, advocating for the largest and riskiest of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” An expert on this topic labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “as corporations grasp the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were met with widespread derision.

That threat has now materialised. This year, energy and mining firms have filed a record number of claims against nations rich and poor, contesting – similar to the UK mine – state efforts to halt global warming. Companies have to date won $114bn via ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP