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How do you understand our political system operates? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

In the modern era, international firms, and the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. Such disputes are conducted behind closed doors. Differing from national judiciaries, these bodies provide no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. They are open solely for businesses based overseas.

When a secret court rules that a legislative action may compromise the corporation’s projected profits, it has the power to grant financial penalties of vast sums, even billions.

These sums constitute not tangible damages but compensation the tribunal officials conclude the company could potentially have made. The administration might be compelled to drop the legislation. It becomes hesitant to enacting future policies along the same lines, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being initiated, as corporations observe each other, and hedge funds finance suits for a share of a share of the settlements. The result? National sovereignty and popular rule are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the rulings enacted by legislatures is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Concrete Instance: The UK Coalmine

Last year, activists achieved a major legal triumph at the high court. The judge found that schemes to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on national carbon targets. The Labour government then withdrew the permission the Tories had approved. Now, this legal outcome is under threat by an offshore tribunal reporting to no one but the corporations filing the suit.

Last August, a company whose final controllers reside in the tax haven lodged a claim challenging the UK government. Last week a arbitration panel in the United States was established to hear it.

The company is suing the UK for the profits it could have earned if the mine had been permitted to go ahead. Citizens have little idea how much this sum represents. What legal team is serving as its counsel in opposition to the British government? An elected representative, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the high court validates it, then a international entity contests it through an undemocratic private court, and a sitting MP works for its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the mining lawsuit was established, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case so far, but it is highly possible that he will utilise the ISDS mechanism to contest the sanctions the UK levied against him following the invasion of Ukraine. He has previously filed a claim against Luxembourg on these grounds, seeking $16bn: an amount representing half nation's yearly budget. Included in the lawyers on his side? the wife of a former prime minister, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its financial support package stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.

Empty Promises and Escalating Risks

We were assured that these events wouldn’t happen. In 2014, a former prime minister, advocating for the largest and riskiest of all investment pacts, told us: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An adviser on this topic accused campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Predictions that “when companies begin to understand the influence they’ve been granted, they will turn their attention from the poorer states to the strong ones” were greeted by general mockery.

That warning has come to pass. This year, fossil fuel and mining firms have filed a unprecedented number of claims against nations rich and poor, contesting – as in the case of the Whitehaven project – government attempts to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP