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What is your understand our democratic process operates? Perhaps similar to this. The public votes for MPs. They vote on bills. When a majority is secured, the bills become law. The law are enforced by the courts. End of story. Yet, that used to be how it once functioned. Those days are over.

The Advent of Shadow Tribunals

In the modern era, overseas companies, and the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at private courts staffed by business advocates. Such disputes are held in secret. Unlike our courts, these tribunals grant no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. They are open exclusively to corporations based overseas.

If a tribunal determines that a government measure may compromise the corporation’s projected profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but money the tribunal officials decide the company might otherwise have made. The administration might be compelled to abandon its policy. It will be deterred from enacting future policies in that area, for fear of facing litigation.

A System Running Rampant

Unprecedented levels of legal actions are being brought, as companies take cues from each other, and investment funds fund legal actions in return for a portion of the awards. The result? National sovereignty and popular rule are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the choices enacted by parliaments is that this clause has been inserted – without democratic mandate, and frequently under a climate of total confidentiality – inside bilateral investment treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The justice ruled that proposals to excavate the first deep coalmine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have no impact on national carbon targets. The new government subsequently revoked the licence the former government had granted. Now, this success is under threat by an foreign court reporting to only the entities petitioning it.

During August, a company whose ultimate owners reside in the Cayman Islands initiated proceedings against the UK government. The previous week a tribunal in the United States was convened to consider the case.

The company is suing the UK for the money it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. What legal team is acting on its behalf against the British government? An elected representative, and ex-law officer in the outgoing administration, the noted patriot the MP. The administration makes a decision, the domestic court validates it, then a foreign company contests it through an unaccountable private court, and a elected official works for its behalf.

A Sanctions Case

Concurrently that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows little of the case at present, but it seems likely that he may employ the ISDS mechanism to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, seeking $16bn: equivalent to half of state's yearly budget. Included in the legal team acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Legal experts contend that the EU’s delay in using frozen Russian assets as guarantee for its financial support package stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments might be preventing the finance Ukraine desperately needs.

Misleading Claims and Escalating Threats

We were assured that such things wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all such treaties, stated: “We’ve signed trade deal upon trade deal and there has never been a issue in the past.” A consultant on this topic accused campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “when companies start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were met with widespread derision.

That prediction has come to pass. In the current period, fossil fuel and resource corporations have lodged a historic level of claims against nations rich and poor, opposing – like the example of the Whitehaven project – official measures to halt environmental catastrophe. Companies have thus far won vast sums through ISDS, of which oil majors have secured $84bn. That represents the combined GDP