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Can you perceive our political system operates? It could be something like this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. End of story. Well, that’s how it used to work. Those days are over.

The Advent of Shadow Tribunals

Today, foreign corporations, or the billionaires behind them, have the power to sue nation states for the policies they pass, at private courts composed of business advocates. These proceedings are held in secret. In contrast to domestic courts, these tribunals allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, or even enterprises headquartered in this country. They are open solely for corporations operating from foreign soil.

If a tribunal determines that a government measure could harm the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These awards are based not on actual losses but compensation the panel members conclude the company could potentially have made. The administration might be compelled to drop the legislation. It will be deterred from passing future laws along the same lines, worried about being sued.

A System Growing Exponentially

Record numbers of disputes are being filed, as firms learn from each other, and investment funds finance suits for a share of a portion of the takings. The consequence? Democratic sovereignty and popular rule are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the choices taken by legislatures is that this stipulation has been written – absent public approval, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Real-World Case: The Whitehaven Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The justice determined that proposals to excavate the first major coal mine in the UK for three decades, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The Labour government later cancelled the licence the previous administration had approved. Now, this success could be compromised by an foreign court answering to exclusively the entities filing the suit.

During August, a company whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. Last week a arbitration panel in the United States was convened to consider the case.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have no clear indication how much this might be. Which individual is serving as its counsel against the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot the MP. The government passes a law, the national judiciary upholds it, then a foreign company contests it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case so far, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK enacted against him after the Russian aggression. He has previously filed a claim against a small nation with similar intent, demanding sixteen billion dollars: half that state's yearly budget. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s delay in using frozen Russian assets as collateral for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios could not occur. In 2014, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement upon trade deal and there has never been a problem in the past.” A consultant on this matter labelled activists of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “as corporations start to realise the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were greeted by general mockery.

That threat is now a reality. This year, energy and mining firms have initiated a record number of cases against nations across the economic spectrum, challenging – similar to the Whitehaven project – official measures to prevent environmental catastrophe. Corporations have so far won $114bn by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP