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Can you perceive our system of government functions? It could be something like this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. However, that used to be how it once functioned. Those days are over.

The Advent of Shadow Tribunals

Today, international firms, along with the oligarchs who own them, can sue governments for the regulations they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held in secret. Unlike our courts, these bodies provide no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses operating from this country. Access is granted only to businesses registered abroad.

Should an arbitration panel rules that a law or policy could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

This compensation represent not tangible damages but compensation the arbitrators decide the company could potentially have made. The administration could be forced to rescind the measure. It will be discouraged from enacting future policies of a similar nature, due to the risk of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of cases are being filed, as firms observe each other, and private equity finance suits in exchange for a share of the takings. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the decisions enacted by parliaments is that this clause has been written – without public consent, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Specific Case: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The justice found that schemes to open the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The Labour government subsequently revoked the licence the former government had approved. Currently, this victory faces being overturned by an foreign court answering to only the entities petitioning it.

In August, a corporate entity whose ultimate owners are located in the tax haven lodged a claim against the UK government. The previous week a tribunal in the United States was set up to hear it.

The claimant is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. We have no idea how much this could amount to. Who is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case to date, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK levied against him following the Russian aggression. He has filed a claim against another European state with similar intent, demanding a colossal sum: an amount representing half state's yearly income. Part of the counsel acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists believe that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Costs

We were assured that such things were not possible. In 2014, a former prime minister, championing the largest and riskiest of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this matter described critics of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations should be concerned by these lawsuits. Warnings that “as corporations grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat has come to pass. In the current period, fossil fuel and resource corporations have lodged a record number of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – government attempts to halt global warming. Companies have so far won $114bn through ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP