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What is your understand our system of government functions? Perhaps similar to this. We elect MPs. They legislate on bills. When a majority is secured, the bills pass into law. The law is upheld by the courts. That's it. However, that was how it operated in the past. Those days are over.

The Rise of Shadow Arbitration Panels

Nowadays, foreign corporations, or the wealthy individuals behind them, are able to litigate against nation states for the regulations they pass, at offshore tribunals staffed by business advocates. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. Access is granted only to entities operating from foreign soil.

When a secret court determines that a legislative action could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums constitute not tangible damages but compensation the tribunal officials decide the company might otherwise have made. The administration could be forced to rescind the measure. It becomes deterred from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of legal actions are being initiated, as firms learn from each other, and private equity finance suits for a share of a portion of the settlements. The result? National sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the choices enacted by parliaments is that this clause has been written – without democratic mandate, and frequently under an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Instance: The UK Coal Mine

Last year, activists secured a significant win at the High Court. The justice found that schemes to excavate the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The new government subsequently revoked the licence the previous administration had approved. Today, this legal outcome faces being overturned by an secret arbitration panel reporting to no one but the corporations filing the suit.

In August, a corporate entity whose ultimate owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in the US capital was established to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. What legal team is serving as its counsel against the state? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot the MP. The administration enacts a policy, the national judiciary validates it, then a foreign company contests it through an unaccountable private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case to date, but it is highly possible that he’ll use the tribunal to challenge the restrictions the UK levied against him after the war in Ukraine. He has initiated proceedings against another European state on these grounds, claiming a colossal sum: equivalent to half of government’s yearly income. Among the legal team acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Trade specialists contend that the EU’s delay in leveraging immobilised Russian assets as collateral for its financial support package stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

Misleading Claims and Growing Threats

Politicians promised that these scenarios could not occur. In 2014, a government leader, advocating for the largest and riskiest of all such treaties, told us: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” An adviser on this issue accused critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That prediction has now materialised. In the current period, oil and gas and extraction companies have filed a historic level of cases against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to halt global warming. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained $84bn. That represents the combined GDP