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What is your perceive our democratic process operates? It could be similar to this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Statutes are enforced by the courts. That's it. Yet, that’s how it once functioned. Not anymore.

The Rise of Shadow Tribunals

In the modern era, overseas companies, along with the oligarchs who own them, can sue governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases take place in secret. In contrast to domestic courts, these tribunals allow no avenue for appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, including businesses headquartered in this country. The door is open exclusively to entities operating from foreign soil.

When a secret court finds that a legislative action might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards are based not on real financial harm but compensation the arbitrators conclude the company could potentially have made. The state could be forced to rescind the measure. It becomes deterred from enacting future policies of a similar nature, for fear of being sued.

A System Running Rampant

Historically high figures of disputes are being initiated, as firms take cues from each other, and investment funds bankroll lawsuits for a share of a share of the takings. The consequence? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the rulings taken by parliaments is that this stipulation has been incorporated – without democratic mandate, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The judge found that plans to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine could have no impact on climate commitments. The incoming administration later cancelled the consent the previous administration had approved. Today, this victory faces being overturned by an secret arbitration panel reporting to only the companies petitioning it.

Last August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. The previous week a tribunal in the United States was established to consider the case.

This firm is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. Which individual is serving as its counsel against the British government? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the high court supports it, then a foreign company disputes it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK imposed on him following the invasion of Ukraine. He has already filed a claim against Luxembourg on these grounds, seeking a colossal sum: half that state's yearly income. Part of the counsel acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts argue that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Risks

We were assured that such things could not occur. Previously, a senior politician, advocating for the biggest and most dangerous of all investment pacts, declared: “The UK has signed investment treaty upon trade deal and there has not been a case in the past.” An adviser on this issue accused critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear such legal actions. Cautionary notes that “once firms begin to understand the authority bestowed upon them, they will turn their attention from the weak nations to the strong ones” were dismissed with general mockery.

That threat has come to pass. In the current period, oil and gas and mining firms have initiated a unprecedented number of claims against nations rich and poor, contesting – similar to the UK mine – government attempts to prevent global warming. Companies have so far won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP