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Can you reckon our system of government functions? Perhaps something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills pass into law. The law are enforced by the courts. End of story. Yet, that used to be how it used to work. No longer.

The Advent of Shadow Tribunals

In the modern era, overseas companies, and the oligarchs that control them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are held in secret. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but funds the arbitrators determine the company could potentially have made. The administration may have to rescind the measure. It will be hesitant to passing future laws along the same lines, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as corporations observe each other, and hedge funds fund legal actions for a share of a portion of the takings. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions made by parliaments is that this provision has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the high court. The judge found that proposals to dig the first major coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no impact on national carbon targets. The incoming administration then withdrew the licence the previous administration had approved. Now, this success could be compromised by an secret arbitration panel answering to no one but the entities bringing the case.

During August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings versus the UK government. The previous week a tribunal in the US capital was set up to consider the case.

The claimant is suing the UK for the profits it might have made if the mine had been allowed to go ahead. The public has little idea how much this could amount to. Who is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the high court validates it, then a international entity contests it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Case

On the same day that the court on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case at present, but it appears probable that he will utilise the tribunal to contest the penalties the UK enacted against him after the war in Ukraine. He has initiated proceedings against a small nation on these grounds, seeking a colossal sum: half that government’s annual revenue. Included in the lawyers acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists contend that the EU’s procrastination in using frozen Russian assets as security for its loan to Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Threats

We were assured that these events wouldn’t happen. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An expert on this matter accused critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries needed to fear these lawsuits. Warnings that “as corporations start to realise the influence they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That prediction has now materialised. Recently, fossil fuel and resource corporations have filed a record number of suits against nations rich and poor, challenging – like the example of the UK mine – state efforts to prevent global warming. Companies have so far won $114bn through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP