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How do you understand our political system functions? Perhaps something like this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Statutes is maintained by the courts. That's it. However, that was how it once functioned. Not anymore.

The Advent of Shadow Tribunals

Today, overseas companies, or the oligarchs behind them, have the power to sue elected administrations for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held in secret. Unlike our courts, these tribunals grant no right of appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even companies operating from this country. Access is granted solely for businesses registered abroad.

Should an arbitration panel rules that a legislative action might diminish the corporation’s projected profits, it can award damages of vast sums, even billions.

These sums represent not real financial harm but money the tribunal officials conclude the company could potentially have made. The administration may have to drop the legislation. It is deterred from enacting future policies of a similar nature, worried about being sued.

A Process Running Rampant

Historically high figures of legal actions are being brought, as companies learn from each other, and hedge funds bankroll lawsuits in return for a cut of the takings. The consequence? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings taken by elected bodies is that this stipulation has been written – without democratic mandate, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Specific Example: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the High Court. The presiding officer ruled that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have no impact on climate commitments. The incoming administration subsequently revoked the consent the former government had granted. Currently, this success faces being overturned by an secret arbitration panel reporting to exclusively the corporations petitioning it.

In August, a corporate entity whose ultimate owners are based in the offshore financial centre lodged a claim against the UK government. The previous week a arbitration panel in Washington DC was established to adjudicate on it.

This firm is seeking compensation from the UK for the money it might have made if the mine had been permitted to commence operations. Citizens have no clear indication how much this sum represents. Which individual is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The state makes a decision, the high court upholds it, then a overseas corporation disputes it through an secretive arbitration panel, and a sitting MP represents its behalf.

The Russian Case

On the same day that the court on the mining lawsuit was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case at present, but it seems likely that he’ll use the ISDS mechanism to fight the restrictions the UK imposed on him subsequent to the war in Ukraine. He has previously started suing Luxembourg on these grounds, demanding a colossal sum: half that nation's annual revenue. Part of the lawyers on his side? a prominent lawyer, wife of the ex-UK leader.

International law scholars argue that the EU’s delay in using frozen Russian assets as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. Years ago, a government leader, advocating for the largest and riskiest of all these agreements, declared: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this matter accused activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the power they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That prediction is now a reality. This year, energy and extraction companies have initiated a unprecedented number of cases against nations across the economic spectrum, challenging – similar to the Whitehaven project – government attempts to stop environmental catastrophe. Companies have so far won vast sums by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP