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What is your perceive our system of government operates? Perhaps similar to this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills pass into law. The law are enforced by the courts. End of story. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Shadow Tribunals

Today, overseas companies, along with the oligarchs behind them, can sue nation states for the regulations they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels grant no opportunity to appeal or judicial review. The general public cannot take a case to them, just as our government, including enterprises based in this country. The door is open only to businesses based overseas.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, potentially billions.

These awards are based not on actual losses but funds the panel members conclude the company would perhaps have made. The state may have to drop the legislation. It becomes hesitant to enacting future policies in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being brought, as companies observe each other, and hedge funds bankroll lawsuits in exchange for a cut of the awards. The result? Democratic sovereignty and democracy are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the rulings made by parliaments is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Specific Case: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the previous government, which had accepted the questionable argument that the mine could have no consequence on national carbon targets. The new government subsequently revoked the consent the previous administration had approved. Currently, this success faces being overturned by an secret arbitration panel accountable to only the companies bringing the case.

In August, a company whose final controllers are based in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in the US capital was convened to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. The public has little idea how much this might be. Who is serving as its counsel challenging the British government? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company disputes it through an undemocratic private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he may employ the tribunal to challenge the penalties the UK enacted against him following the Russian aggression. He has already initiated proceedings against a small nation with similar intent, seeking sixteen billion dollars: an amount representing half state's yearly income. Part of the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen state funds as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that these events were not possible. Previously, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “We’ve signed investment treaty upon trade deal and there has not been a problem in the past.” An expert on this topic described critics of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the power they now possess, they will shift their focus from the weak nations to the strong ones” were greeted by general mockery.

That prediction is now a reality. This year, energy and extraction companies have initiated a record number of cases against nations rich and poor, challenging – like the example of the UK mine – state efforts to halt global warming. Corporations have to date won vast sums by using ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP