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How do you reckon our political system functions? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is achieved, the bills pass into law. The law is upheld by the courts. That's it. Well, that used to be how it used to work. Not anymore.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, and the billionaires that control them, are able to litigate against nation states for the policies they pass, at offshore tribunals made up of commercial attorneys. Such disputes are held behind closed doors. In contrast to domestic courts, these tribunals grant no right of appeal or judicial review. The general public are unable to file a case to them, just as our government, including businesses headquartered in this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel rules that a law or policy might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

This compensation constitute not tangible damages but funds the tribunal officials determine the company would perhaps have made. The state may have to abandon its policy. It is hesitant to introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being brought, as corporations observe each other, and private equity bankroll lawsuits in exchange for a share of the awards. The outcome? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the rulings enacted by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid conditions of total confidentiality – into international trade agreements.

A Real-World Example: The UK Coalmine

A year ago, a conservation group won a great victory at the senior court. The judge determined that plans to dig the first deep coalmine in the UK for 30 years, in northwest England, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the licence the Tories had approved. Now, this success faces being overturned by an offshore tribunal reporting to only the corporations filing the suit.

In August, a company whose ultimate owners are based in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have little idea how much this might be. Which individual is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the high court validates it, then a international entity challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case to date, but it appears probable that he may employ the ISDS mechanism to challenge the penalties the UK levied against him following the invasion of Ukraine. He has previously started suing Luxembourg with similar intent, claiming $16bn: equivalent to half of government’s annual revenue. Part of the lawyers acting for him in that case? a prominent lawyer, married to the previous PM.

Trade specialists contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations might be preventing the finance Ukraine critically depends on.

False Assurances and Escalating Threats

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, championing the most significant and hazardous of all these agreements, declared: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this matter described activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “once firms grasp the influence they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were greeted by general mockery.

That threat has now materialised. Recently, energy and resource corporations have lodged a historic level of claims against nations both wealthy and developing, contesting – similar to the UK mine – government attempts to stop climate breakdown. Corporations have so far won $114bn via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP