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Can you perceive our political system works? It could be similar to this. We elect MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Statutes are enforced by the courts. That's it. However, that used to be how it once functioned. No longer.

The Advent of Shadow Tribunals

Nowadays, international firms, and the wealthy individuals who own them, can sue nation states for the regulations they pass, at private courts staffed by commercial attorneys. These proceedings take place behind closed doors. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, including enterprises operating from this country. They are open only to businesses operating from foreign soil.

When a secret court rules that a government measure might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

This compensation are based not on actual losses but money the arbitrators conclude the company might otherwise have made. The administration may have to abandon its policy. It will be hesitant to introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being brought, as corporations learn from each other, and investment funds finance suits for a share of a share of the awards. The result? National sovereignty and popular rule are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the decisions taken by elected bodies is that this stipulation has been incorporated – without democratic mandate, and often in a climate of total confidentiality – inside trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the High Court. The judge found that plans to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine could have zero effect on national carbon targets. The Labour government then withdrew the permission the former government had approved. Now, this legal outcome could be compromised by an foreign court accountable to exclusively the corporations petitioning it.

During August, a firm whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Recently a tribunal in the US capital was established to hear it.

The company is suing the UK for the money it could have earned if the mine had received permission to go ahead. Citizens have little idea how much this could amount to. Which individual is serving as its counsel challenging the UK administration? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a foreign company disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it seems likely that he may employ the tribunal to contest the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has already initiated proceedings against a small nation on these grounds, claiming $16bn: half that nation's annual revenue. Included in the lawyers on his side? a prominent lawyer, spouse of the former British prime minister.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Growing Costs

The public was told that such things could not occur. Previously, a senior politician, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed trade agreement upon trade deal and there has not been a case in the past.” An adviser on this topic labelled critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “as corporations grasp the power they now possess, they will redirect their efforts from the weak nations to the developed economies” were greeted by scepticism.

That threat has now materialised. Recently, oil and gas and extraction companies have initiated a historic level of cases against nations across the economic spectrum, opposing – as in the case of the UK mine – government attempts to stop environmental catastrophe. Corporations have so far won vast sums through ISDS, of which oil majors have obtained $84bn. That represents the combined GDP