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How do you perceive our democratic process functions? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. End of story. Well, that was how it used to work. Those days are over.

The Emergence of Shadow Tribunals

Today, international firms, and the oligarchs behind them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. These proceedings are held in secret. Unlike our courts, these bodies provide no avenue for appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even enterprises based in this country. The door is open exclusively to businesses registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

These awards constitute not tangible damages but compensation the arbitrators determine the company would perhaps have made. The government might be compelled to rescind the measure. It is discouraged from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as companies take cues from each other, and hedge funds finance suits for a share of a portion of the settlements. The result? National sovereignty and popular rule are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the rulings made by legislatures is that this stipulation has been written – without public consent, and frequently under a climate of extreme secrecy – within international trade agreements.

A Specific Example: The Whitehaven Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The judge determined that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the permission the Tories had granted. Today, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the corporations petitioning it.

In August, a firm whose beneficial owners are based in the Cayman Islands lodged a claim versus the UK government. Last week a arbitration panel in Washington DC was set up to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to proceed. The public has no idea how much this might be. Who is serving as its counsel against the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a foreign company disputes it through an secretive arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he may employ the ISDS mechanism to contest the restrictions the UK enacted against him following the war in Ukraine. He has already started suing another European state with similar intent, claiming sixteen billion dollars: half that state's yearly income. Among the counsel representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars believe that the EU’s hesitation in leveraging immobilised state funds as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over democratic administrations could be blocking the finance Ukraine urgently requires.

Misleading Claims and Mounting Threats

The public was told that these events wouldn’t happen. In 2014, a senior politician, championing the largest and riskiest of all such treaties, told us: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this matter accused critics of “alarmism … in reality, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat is now a reality. This year, oil and gas and extraction companies have lodged a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – official measures to prevent global warming. Corporations have thus far won vast sums by using ISDS, of which energy giants have secured the majority. That represents the combined GDP