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Can you reckon our political system operates? Maybe something like this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Shadow Tribunals

Today, foreign corporations, or the wealthy individuals behind them, can sue governments for the policies they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these panels provide no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, or even companies headquartered in this country. They are open solely for businesses based overseas.

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

This compensation represent not tangible damages but money the arbitrators decide the company would perhaps have made. The state might be compelled to rescind the measure. It becomes discouraged from passing future laws of a similar nature, due to the risk of facing litigation.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as corporations take cues from each other, and hedge funds fund legal actions in return for a cut of the takings. The outcome? Sovereignty and democratic governance are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions enacted by parliaments is that this provision has been incorporated – without democratic mandate, and often in conditions of total confidentiality – inside trade treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, activists secured a significant win at the high court. The justice determined that plans to excavate the first deep coalmine in the UK for a generation, in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no impact on our carbon budgets. The new government subsequently revoked the permission the previous administration had issued. Currently, this success faces being overturned by an offshore tribunal reporting to no one but the corporations petitioning it.

During August, a company whose beneficial owners are located in the offshore financial centre filed a lawsuit against the UK government. Last week a arbitration panel in Washington DC was established to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. The public has no idea how much this could amount to. Who is acting on its behalf challenging the UK administration? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the high court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce 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 Russian aggression. He has initiated proceedings against Luxembourg for this reason, seeking $16bn: equivalent to half of nation's yearly budget. Among the lawyers representing him there? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Growing Risks

We were assured that these scenarios wouldn’t happen. In 2014, a former prime minister, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” An adviser on this issue accused critics of “alarmism … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “when companies begin to understand the authority bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were greeted by widespread derision.

That warning is now a reality. This year, oil and gas and extraction companies have initiated a historic level of claims against nations across the economic spectrum, opposing – like the example of the UK mine – official measures to prevent global warming. Firms have so far won $114bn via ISDS, of which oil majors have secured the majority. That represents the combined GDP