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What is your understand our democratic process functions? Maybe something like this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Emergence of Shadow Tribunals

Today, overseas companies, or the oligarchs who own them, can sue nation states for the laws they pass, at offshore tribunals made up of business advocates. Such disputes are held behind closed doors. Unlike our courts, these tribunals grant no right of appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even companies based in this country. They are open only to entities based overseas.

Should an arbitration panel finds that a legislative action might diminish the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

This compensation are based not on tangible damages but money the tribunal officials conclude the company would perhaps have made. The state may have to rescind the measure. It is deterred from passing future laws along the same lines, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being filed, as firms take cues from each other, and investment funds fund legal actions for a share of a share of the awards. The consequence? National sovereignty and democratic governance are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the choices enacted by elected bodies is that this provision has been written – without public consent, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Instance: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The presiding officer found that plans to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine could have no impact on climate commitments. The Labour government later cancelled the permission the Tories had approved. Currently, this success is under threat by an secret arbitration panel accountable to no one but the entities filing the suit.

In August, a corporate entity whose beneficial owners reside in the Cayman Islands initiated proceedings versus the UK government. Last week a dispute settlement body in Washington DC was established to adjudicate on it.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. The public has little idea how much this sum represents. Which individual is serving as its counsel challenging the British government? A sitting MP, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a foreign company disputes it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK levied against him after the invasion of Ukraine. He has already started suing Luxembourg on these grounds, seeking sixteen billion dollars: an amount representing half nation's yearly income. Part of the legal team representing him there? a prominent lawyer, wife of the former British prime minister.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

Empty Promises and Growing Threats

We were assured that such things wouldn’t happen. In 2014, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” An adviser on this matter described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Predictions that “once firms begin to understand the power bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That threat has now materialised. Recently, oil and gas and resource corporations have lodged a unprecedented number of cases against nations rich and poor, opposing – like the example of the Cumbrian coalmine – government attempts to stop climate breakdown. Firms have to date won $114bn through ISDS, of which energy giants have obtained $84bn. That represents the combined GDP