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What is your understand our political system functions? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. However, that was how it used to work. No longer.

The Rise of Shadow Tribunals

In the modern era, international firms, and the oligarchs who own them, can sue nation states for the regulations they pass, at private courts staffed by business advocates. The cases take place in secret. In contrast to domestic courts, these tribunals grant no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including enterprises based in this country. They are open exclusively to entities based overseas.

If a tribunal rules that a legislative action could harm the corporation’s anticipated profits, it can award financial penalties of vast sums, even billions.

These sums are based not on tangible damages but money the tribunal officials determine the company could potentially have made. The government might be compelled to drop the legislation. It becomes deterred from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as firms observe each other, and investment funds finance suits in exchange for a portion of the takings. The outcome? Sovereignty and democracy are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the decisions made by parliaments is that this provision has been written – absent public approval, and frequently under a climate of profound opacity – inside international trade agreements.

A Concrete Example: The Cumbrian Coalmine

Last year, activists won a great victory at the high court. The judge found that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the licence the former government had issued. Today, this victory faces being overturned by an secret arbitration panel answering to exclusively the companies bringing the case.

During August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. Recently a tribunal in the US capital was established to consider the case.

This firm is suing the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has little idea how much this might be. Who is acting on its behalf in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The state enacts a policy, the domestic court validates it, then a foreign company disputes it through an unaccountable private court, and a sitting MP acts on its behalf.

The Russian Challenge

On the same day that the tribunal on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case to date, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has started suing a small nation for this reason, claiming sixteen billion dollars: half that nation's yearly budget. Included in the lawyers on his side? Cherie Blair, married to the previous PM.

Trade specialists argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Threats

Politicians promised that these scenarios were not possible. Previously, a senior politician, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An adviser on this topic labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by these lawsuits. Warnings that “when companies begin to understand the influence they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That warning is now a reality. This year, energy and resource corporations have filed a unprecedented number of suits against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Firms have so far won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP