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What is your understand our political system works? Maybe something like this. We elect MPs. They vote on bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. End of story. Well, that was how it used to work. Not anymore.

The Advent of Shadow Tribunals

Today, international firms, along with the oligarchs behind them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies operating from this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal finds that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These sums constitute not tangible damages but money the panel members determine the company could potentially have made. The state could be forced to abandon its policy. It will be hesitant to introducing similar legislation of a similar nature, worried about being sued.

A Process Running Rampant

Historically high figures of disputes are being filed, as corporations take cues from each other, and private equity fund legal actions for a share of a cut of the takings. The consequence? Democratic sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the rulings taken by parliaments is that this stipulation has been inserted – absent public approval, and typically amid conditions of profound opacity – into bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The justice ruled that plans to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government later cancelled the consent the former government had issued. Now, this success is under threat by an offshore tribunal answering to exclusively the entities filing the suit.

In August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings challenging the UK government. Recently a arbitration panel in the US capital was established to adjudicate on it.

The company is suing the UK for the revenue it would have generated if the mine had been permitted to commence operations. Citizens have little idea how much this sum represents. What legal team is serving as its counsel in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a foreign company challenges it through an secretive private court, and a member of our parliament acts on its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it seems likely that he may employ the arbitration process to challenge the sanctions the UK levied against him subsequent to the Russian aggression. He has previously initiated proceedings against a small nation for this reason, demanding $16bn: an amount representing half government’s yearly budget. Included in the counsel acting for him in that case? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations could be blocking the finance Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that these events were not possible. Previously, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this topic described critics of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries had to worry about ISDS claims. Predictions that “when companies start to realise the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. Recently, energy and resource corporations have lodged a historic level of cases against nations rich and poor, contesting – like the example of the Whitehaven project – government attempts to halt environmental catastrophe. Firms have so far won $114bn via ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP