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How do you perceive our system of government functions? It could be something like this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills become law. Statutes is maintained by the courts. That's it. Yet, that was how it once functioned. No longer.

The Rise of Shadow Tribunals

Today, international firms, and the wealthy individuals who own them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. The cases are held in secret. Differing from national judiciaries, these tribunals grant no right of appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, or even businesses operating from this country. The door is open only to entities registered abroad.

If a tribunal finds that a law or policy may compromise the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but money the arbitrators conclude the company might otherwise have made. The government could be forced to drop the legislation. It becomes hesitant to introducing similar legislation in that area, for fear of being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being brought, as companies observe each other, and hedge funds fund legal actions in exchange for a cut of the awards. The outcome? Sovereignty and democracy are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices made by parliaments is that this provision has been inserted – without public consent, and often in conditions of total confidentiality – inside international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Last year, a conservation group achieved a major legal triumph at the high court. The justice found that schemes to open the first new deep coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the permission the previous administration had issued. Currently, this victory faces being overturned by an foreign court accountable to exclusively the companies bringing the case.

During August, a firm whose final controllers are based in the offshore financial centre filed a lawsuit challenging the UK government. Last week a tribunal in Washington DC was set up to hear it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to proceed. We have no idea how much this might be. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a elected official represents its behalf.

The Russian Case

Concurrently that the tribunal on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case to date, but it seems likely that he’ll use the tribunal to fight the restrictions the UK levied against him subsequent to the Russian aggression. He has previously initiated proceedings against a small nation with similar intent, demanding $16bn: an amount representing half nation's yearly budget. Among the legal team on his side? Cherie Blair, wife of the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen Russian assets as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Mounting Risks

Politicians promised that such things could not occur. Years ago, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An expert on this topic labelled activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “when companies begin to understand the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That prediction has now materialised. This year, fossil fuel and mining firms have initiated a record number of suits against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to halt climate breakdown. Firms have thus far won $114bn via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP