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What is your perceive our system of government functions? It could be something like this. We elect MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation are enforced by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Advent of Shadow Tribunals

Today, overseas companies, and the oligarchs that control them, have the power to sue nation states for the laws they pass, at secret arbitration panels made up of corporate lawyers. These proceedings take place away from public scrutiny. Unlike our courts, these bodies allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including businesses headquartered in this country. They are open exclusively to businesses operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

This compensation represent not actual losses but money the panel members determine the company might otherwise have made. The state could be forced to abandon its policy. It becomes deterred from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of disputes are being filed, as firms take cues from each other, and hedge funds bankroll lawsuits in exchange for a portion of the awards. The result? National sovereignty and popular rule are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the decisions enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under conditions of profound opacity – inside trade treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The justice determined that proposals to dig the first new deep coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the previous government, which had accepted the questionable argument that the mine would have had no impact on national carbon targets. The Labour government later cancelled the licence the previous administration had issued. Now, this victory faces being overturned by an offshore tribunal accountable to no one but the entities petitioning it.

In August, a firm whose beneficial owners reside in the tax haven initiated proceedings against the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no idea how much this might be. What legal team is acting on its behalf against the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot the MP. The administration enacts a policy, the high court validates it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it appears probable that he’ll use the tribunal to contest the restrictions the UK imposed on him after the invasion of Ukraine. He has already started suing a small nation for this reason, demanding $16bn: equivalent to half of government’s annual revenue. Among the counsel on his side? the wife of a former prime minister, wife of the previous PM.

Trade specialists believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its financial support package arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over elected governments could be blocking the funds Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that these events could not occur. Previously, a senior politician, championing the largest and riskiest of all investment pacts, stated: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this issue labelled activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations start to realise the authority bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction has come to pass. In the current period, oil and gas and mining firms have lodged a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the Whitehaven project – government attempts to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP