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How do you reckon our political system works? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills pass into law. The law is upheld by the courts. That's it. Yet, that used to be how it used to work. Those days are over.

The Advent of Shadow Tribunals

Nowadays, overseas companies, or the oligarchs behind them, can sue governments for the policies they pass, at private courts staffed by commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these panels provide no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, including companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

Should an arbitration panel finds that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These sums represent not actual losses but compensation the tribunal officials decide the company might otherwise have made. The state may have to drop the legislation. It becomes deterred from enacting future policies in that area, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Record numbers of legal actions are being filed, as companies observe each other, and investment funds bankroll lawsuits in exchange for a share of the takings. The result? Sovereignty and democratic governance are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the choices enacted by elected bodies is that this provision has been written – without democratic mandate, and frequently under an atmosphere of profound opacity – into trade treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the high court. The judge found that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the licence the Tories had issued. Now, this legal outcome could be compromised by an secret arbitration panel accountable to only the entities bringing the case.

During August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a tribunal in Washington DC was established to hear it.

The company is suing the UK for the profits it might have made if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. Who is serving as its counsel against the state? A member of parliament, and ex-law officer in the outgoing administration, that great patriot the MP. The state enacts a policy, the national judiciary validates it, then a overseas corporation contests it through an secretive arbitration panel, and a elected official represents its behalf.

A Sanctions Case

On the same day that the court on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK enacted against him after the war in Ukraine. He has previously filed a claim against a small nation for this reason, claiming a colossal sum: half that government’s yearly income. Part of the lawyers acting for him in that case? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s hesitation in using frozen oligarchs' funds as security for its loan to Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations could be blocking the money Ukraine urgently requires.

Empty Promises and Growing Threats

The public was told that these scenarios could not occur. In 2014, a government leader, promoting the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade deal after trade deal and we have never seen a case in the past.” An adviser on this issue labelled campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear ISDS claims. Predictions that “as corporations start to realise the power they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat is now a reality. Recently, energy and mining firms have lodged a historic level of claims against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to prevent global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured $84bn. That equates to the combined GDP