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What is your perceive our political system works? Maybe along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. That's it. Yet, that was how it operated in the past. Those days are over.

The Advent of Shadow Courts

Nowadays, overseas companies, and the billionaires behind them, can sue governments for the policies they pass, at offshore tribunals staffed by corporate lawyers. The cases take place in secret. Unlike our courts, these bodies allow no avenue for appeal or judicial review. The general public cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted solely for corporations registered abroad.

Should an arbitration panel rules that a government measure may compromise 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 decide the company could potentially have made. The administration could be forced to abandon its policy. It becomes hesitant to introducing similar legislation along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies observe each other, and hedge funds finance suits for a share of a portion of the awards. The consequence? Sovereignty and popular rule are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the choices taken by elected bodies is that this stipulation has been inserted – without public consent, and typically amid a climate of profound opacity – inside international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The justice determined that plans to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no consequence on climate commitments. The incoming administration then withdrew the consent the former government had approved. Now, this legal outcome could be compromised by an secret arbitration panel accountable to exclusively the entities petitioning it.

Last August, a firm whose ultimate owners are based in the tax haven initiated proceedings versus the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to go ahead. Citizens have little idea how much this might be. Who is serving as its counsel against the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a overseas corporation contests it through an secretive arbitration panel, and a member of our parliament represents its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it is highly possible that he’ll use the tribunal to challenge the restrictions the UK imposed on him following the war in Ukraine. He has started suing another European state with similar intent, seeking $16bn: an amount representing half nation's yearly budget. Among the lawyers acting for him in that case? Cherie Blair, wife of the former British prime minister.

Legal experts believe that the EU’s hesitation in using frozen Russian assets as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Risks

We were assured that these scenarios were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all investment pacts, declared: “We’ve signed trade deal upon trade deal and there has never been a issue in the past.” A consultant on this issue labelled activists of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear ISDS claims. Warnings that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning has now materialised. This year, oil and gas and resource corporations have initiated a unprecedented number of claims against nations rich and poor, contesting – as in the case of the UK mine – official measures to prevent environmental catastrophe. Companies have to date won $114bn through ISDS, of which energy giants have secured the majority. That equates to the combined GDP