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What is your understand our political system works? Perhaps similar to this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills pass into law. The law is maintained by the courts. End of story. However, that was how it once functioned. Those days are over.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, or the billionaires who own them, can sue nation states for the regulations they pass, at secret arbitration panels composed of business advocates. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these bodies provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even businesses headquartered in this country. The door is open only to corporations based overseas.

If a tribunal rules that a legislative action could harm the corporation’s projected profits, it has the power to grant damages of vast sums, potentially billions.

These awards constitute not actual losses but funds the panel members conclude the company would perhaps have made. The government might be compelled to abandon its policy. It becomes hesitant to introducing similar legislation of a similar nature, due to the risk of being sued.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as firms take cues from each other, and hedge funds finance suits in return for a cut of the settlements. The consequence? National sovereignty and democracy are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the rulings made by parliaments is that this provision has been written – without public consent, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Specific Case: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The judge ruled 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 outgoing administration, which had accepted the extraordinary assertion that the mine would have no impact on climate commitments. The incoming administration then withdrew the permission the former government had issued. Today, this legal outcome faces being overturned by an foreign court reporting to no one but the corporations bringing the case.

In August, a corporate entity whose beneficial owners reside in the offshore financial centre filed a lawsuit versus the UK government. The previous week a dispute settlement body in Washington DC was convened to hear it.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to proceed. We have no idea how much this sum represents. Who is serving as its counsel in opposition to the UK administration? A sitting MP, and former attorney-general in the previous government, that great patriot the MP. The government enacts a policy, the high court supports it, then a foreign company challenges it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case so far, but it is highly possible that he may employ the ISDS mechanism to fight the penalties the UK levied against him following the war in Ukraine. He has previously started suing a small nation on these grounds, claiming sixteen billion dollars: half that state's yearly budget. Among the counsel acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in utilising seized oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Threats

The public was told that these events were not possible. In 2014, a government leader, championing the biggest and most dangerous of all such treaties, stated: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this issue labelled activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations needed to fear such legal actions. Cautionary notes that “as corporations start to realise the influence they now possess, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning has come to pass. Recently, energy and extraction companies have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Companies have thus far won vast sums through ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP