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What is your reckon our political system functions? Perhaps along the lines of this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, international firms, along with the billionaires that control them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. They are open exclusively to businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, even billions.

This compensation are based not on real financial harm but money the panel members conclude the company could potentially have made. The administration might be compelled to abandon its policy. It will be hesitant to enacting future policies in that area, worried about facing litigation.

A Process Running Rampant

Record numbers of cases are being initiated, as firms take cues from each other, and private equity finance suits for a share of a cut of the awards. The result? Democratic sovereignty and democracy are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices enacted by parliaments is that this provision has been inserted – absent public approval, and frequently under conditions of extreme secrecy – into trade treaties.

A Real-World Instance: The UK Coalmine

Last year, a conservation group secured a significant win at the high court. The presiding officer determined that proposals to open the first deep coalmine in the UK for three decades, in Cumbria, were unlawfully approved by the previous government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The new government later cancelled the licence the Tories had approved. Today, this victory could be compromised by an foreign court answering to exclusively the entities petitioning it.

In August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim against the UK government. The previous week a tribunal in the US capital was convened to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no idea how much this sum represents. Who is representing it in opposition to the UK administration? An elected representative, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a foreign company contests it through an secretive private court, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know little of the case so far, but it seems likely that he will utilise the tribunal to fight the penalties the UK levied against him following the invasion of Ukraine. He has filed a claim against a small nation with similar intent, claiming a colossal sum: half that nation's annual revenue. Among the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

Trade specialists believe that the EU’s hesitation in using frozen state funds as collateral for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over elected governments might be preventing the funds Ukraine critically depends on.

Empty Promises and Mounting Risks

Politicians promised that such things were not possible. Years ago, a senior politician, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An adviser on this topic described campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear ISDS claims. Predictions that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by general mockery.

That prediction has come to pass. Recently, oil and gas and extraction companies have initiated a unprecedented number of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have thus far won $114bn by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP