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Can you reckon our political system operates? Perhaps similar to this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills pass into law. Statutes is maintained by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Emergence of Shadow Tribunals

Today, overseas companies, or the billionaires who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. The cases take place in secret. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. You or I are unable to file a case to them, just as our government, including companies operating from this country. The door is open exclusively to corporations registered abroad.

When a secret court determines that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These awards constitute not real financial harm but compensation the panel members conclude the company might otherwise have made. The government may have to rescind the measure. It will be deterred from introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of legal actions are being initiated, as corporations take cues from each other, and hedge funds finance suits for a share of a share of the settlements. The consequence? National sovereignty and popular rule are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the choices enacted by parliaments is that this clause has been written – without public consent, and often in an atmosphere of total confidentiality – within trade treaties.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The justice found that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The Labour government later cancelled the consent the Tories had approved. Today, this success faces being overturned by an secret arbitration panel answering to no one but the companies petitioning it.

During August, a corporate entity whose beneficial owners reside in the tax haven lodged a claim challenging the UK government. Last week a arbitration panel in the US capital was established to adjudicate on it.

The company is litigating against the UK for the money it would have generated if the mine had been permitted to proceed. The public has little idea how much this might be. Which individual is representing it challenging the state? A member of parliament, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The government enacts a policy, the domestic court validates it, then a foreign company disputes it through an secretive arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Challenge

On the same day that the panel on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case so far, but it appears probable that he will utilise the ISDS mechanism to fight the restrictions the UK enacted against him following the war in Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming $16bn: equivalent to half of nation's yearly income. Included in the legal team acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Legal experts argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine urgently requires.

Empty Promises and Escalating Risks

We were assured that such things wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all investment pacts, told us: “The UK has signed trade agreement upon trade deal and there has never been a issue in the past.” An adviser on this topic labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Predictions that “once firms begin to understand the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were greeted by general mockery.

That warning is now a reality. In the current period, oil and gas and extraction companies have filed a historic level of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – state efforts to halt climate breakdown. Corporations have so far won vast sums by using ISDS, of which oil majors have secured $84bn. That represents the combined GDP