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Can you reckon our political system functions? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. The law is maintained by the courts. That's it. Well, that’s how it once functioned. No longer.

The Advent of Shadow Courts

Today, foreign corporations, or the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings are held in secret. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. The general public are barred from bringing a case to them, just as our government, including companies headquartered in this country. The door is open only to corporations registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but compensation the tribunal officials conclude the company might otherwise have made. The administration may have to rescind the measure. It is discouraged from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as companies observe each other, and investment funds fund legal actions for a share of a cut of the awards. The outcome? Sovereignty and democratic governance are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the choices taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and often in conditions of total confidentiality – within international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Last year, a conservation group 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 northwest England, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had no consequence on national carbon targets. The new government then withdrew the licence the former government had granted. Today, this victory faces being overturned by an secret arbitration panel accountable to no one but the corporations petitioning it.

During August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in the United States was set up to hear it.

The company is suing the UK for the profits it would have generated if the mine had been permitted to commence operations. We have little idea how much this might be. Who is acting on its behalf against the British government? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a foreign company contests it through an secretive offshore tribunal, and a elected official acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it appears probable that he may employ the arbitration process to contest the restrictions the UK imposed on him following the invasion of Ukraine. He has already filed a claim against another European state with similar intent, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Part of the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that these scenarios could not occur. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, declared: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this topic labelled activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning is now a reality. In the current period, fossil fuel and mining firms have filed a record number of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Firms have thus far won $114bn via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP