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How do you understand our system of government functions? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. End of story. Well, that’s how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

In the modern era, overseas companies, and the billionaires who own them, are able to litigate against governments for the regulations they pass, at private courts staffed by business advocates. Such disputes take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even enterprises based in this country. They are open only to entities registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

This compensation are based not on tangible damages but funds the panel members conclude the company might otherwise have made. The administration may have to abandon its policy. It will be deterred from introducing similar legislation in that area, for fear of facing litigation.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and hedge funds finance suits for a share of a share of the takings. The result? National sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the rulings taken by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid an atmosphere of profound opacity – into international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

A year ago, activists secured a significant win at the senior court. The justice found that schemes to dig the first new deep coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on climate commitments. The incoming administration later cancelled the licence the former government had granted. Now, this legal outcome is under threat by an offshore tribunal reporting to exclusively the companies filing the suit.

Last August, a company whose ultimate owners are based in the offshore financial centre initiated proceedings versus the UK government. Last week a dispute settlement body in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had received permission to go ahead. Citizens have no idea how much this sum represents. Which individual is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot the MP. The state makes a decision, the national judiciary supports it, then a overseas corporation contests it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case so far, but it appears probable that he may employ the tribunal to contest the penalties the UK enacted against him after the invasion of Ukraine. He has previously started suing another European state for this reason, demanding sixteen billion dollars: an amount representing half nation's annual revenue. Part of the legal team on his side? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over sovereign states may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Threats

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, advocating for the biggest and most dangerous of all these agreements, told us: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” An adviser on this matter accused campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear ISDS claims. Warnings that “as corporations begin to understand the power they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning is now a reality. This year, fossil fuel and mining firms have lodged a unprecedented number of claims against nations rich and poor, opposing – as in the case of the UK mine – government attempts to stop environmental catastrophe. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP