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How do you understand our political system operates? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is obtained, the bills become law. The law are enforced by the courts. Simple as that. Well, that used to be how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Today, international firms, or the wealthy individuals that control them, are able to litigate against elected administrations for the policies they pass, at private courts composed of commercial attorneys. Such disputes are conducted behind closed doors. Unlike our courts, these panels grant no right of appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted only to businesses based overseas.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it has the power to grant compensation of vast sums, running into billions.

This compensation are based not on real financial harm but compensation the tribunal officials decide the company might otherwise have made. The administration may have to rescind the measure. It becomes hesitant to passing future laws along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as companies take cues from each other, and investment funds finance suits for a share of a share of the awards. The outcome? Sovereignty and democracy are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions taken by elected bodies is that this stipulation has been incorporated – absent public approval, and often in a climate of profound opacity – within trade treaties.

A Specific Example: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The presiding officer found that plans to excavate the first deep coalmine in the UK for 30 years, in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The new government later cancelled the licence the previous administration had granted. Now, this legal outcome could be compromised by an offshore tribunal reporting to no one but the corporations bringing the case.

In August, a company whose ultimate owners are located in the Cayman Islands lodged a claim challenging the UK government. The previous week a tribunal in the US capital was convened to consider the case.

The claimant is suing the UK for the money it might have made if the mine had been allowed to proceed. The public has little idea how much this sum represents. Who is representing it against the state? An elected representative, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the domestic court upholds it, then a overseas corporation contests it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Case

On the same day that the panel on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case so far, but it seems likely that he will utilise the tribunal to contest the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has started suing a small nation for this reason, demanding a colossal sum: equivalent to half of nation's annual revenue. Part of the legal team on his side? Cherie Blair, married to the former British prime minister.

Trade specialists contend that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine desperately needs.

Misleading Claims and Growing Costs

We were assured that such things could not occur. Previously, a government leader, advocating for the biggest and most dangerous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has never been a problem in the past.” An adviser on this matter labelled activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear these lawsuits. Predictions that “once firms grasp the influence they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That threat is now a reality. Recently, energy and extraction companies have lodged a record number of cases against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – government attempts to halt global warming. Corporations have to date won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP