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What is your understand our political system works? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills pass into law. The law are enforced by the courts. End of story. However, that’s how it once functioned. No longer.

The Emergence of Shadow Tribunals

In the modern era, international firms, and the billionaires behind them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by business advocates. These proceedings take place in secret. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, or even businesses based in this country. The door is open only to corporations operating from foreign soil.

Should an arbitration panel determines that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

These awards constitute not tangible damages but compensation the panel members determine the company might otherwise have made. The government may have to rescind the measure. It is deterred from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as firms take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the takings. The outcome? Democratic sovereignty and democracy are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the choices made by elected bodies is that this clause has been written – without democratic mandate, and often in a climate of extreme secrecy – inside international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The judge ruled that proposals to open the first deep coalmine in the UK for 30 years, in Cumbria, were wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The Labour government subsequently revoked the consent the Tories had granted. Now, this legal outcome faces being overturned by an offshore tribunal accountable to no one but the companies petitioning it.

During August, a company whose ultimate owners are located in the tax haven lodged a claim challenging the UK government. Last week a tribunal in the US capital was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had received permission to commence operations. We have no clear indication how much this might be. Which individual is acting on its behalf against the British government? A sitting MP, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a overseas corporation challenges it through an undemocratic private court, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it seems likely that he may employ the arbitration process to contest the restrictions the UK levied against him after the invasion of Ukraine. He has initiated proceedings against Luxembourg with similar intent, claiming $16bn: equivalent to half of nation's yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists argue that the EU’s delay in utilising seized oligarchs' funds as security for its financial support package stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over elected governments could be blocking the funds Ukraine desperately needs.

Misleading Claims and Growing Risks

The public was told that such things wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” An adviser on this topic accused campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “when companies begin to understand the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were greeted by general mockery.

That prediction has now materialised. This year, fossil fuel and extraction companies have lodged a historic level of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – government attempts to prevent climate breakdown. Companies have to date won $114bn through ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP