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How do you understand our political system operates? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills become law. Statutes is upheld by the courts. Simple as that. However, that’s how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

Today, international firms, along with the billionaires who own them, can sue governments for the laws they pass, at offshore tribunals composed of corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, or even enterprises operating from this country. They are open solely for entities based overseas.

When a secret court rules that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

These sums are based not on actual losses but funds the tribunal officials conclude the company might otherwise have made. The government might be compelled to abandon its policy. It is deterred from passing future laws in that area, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and hedge funds finance suits for a share of a portion of the takings. The outcome? Democratic sovereignty and democracy are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions enacted by elected bodies is that this provision has been incorporated – without public consent, and typically amid a climate of profound opacity – inside international trade agreements.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the high court. The justice determined that schemes to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have zero effect on our carbon budgets. The new government later cancelled the permission the previous administration had granted. Now, this legal outcome faces being overturned by an foreign court reporting to no one but the corporations bringing the case.

During August, a company whose ultimate owners are based in the offshore financial centre lodged a claim challenging the UK government. Last week a tribunal in Washington DC was set up to hear it.

The company is seeking compensation from the UK for the profits it might have made if the mine had received permission to go ahead. The public has no clear indication how much this sum represents. Who is acting on its behalf in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a international entity contests it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

The Russian Case

On the same day that the court on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case at present, but it appears probable that he will utilise the tribunal to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has filed a claim against another European state for this reason, claiming a colossal sum: half that government’s yearly budget. Included in the lawyers representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts believe that the EU’s delay in using frozen oligarchs' funds as security for its aid for 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 extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine critically depends on.

False Assurances and Growing Risks

Politicians promised that these scenarios could not occur. Years ago, a senior politician, advocating for the biggest and most dangerous of all investment pacts, declared: “We’ve signed investment treaty upon trade deal and there has not been a issue in the past.” A consultant on this topic labelled critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “as corporations start to realise the authority they’ve been granted, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That prediction has come to pass. Recently, energy and mining firms have initiated a unprecedented number of claims against nations across the economic spectrum, opposing – like the example of the UK mine – government attempts to prevent global warming. Firms have so far won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP