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What is your understand our system of government works? Perhaps something like this. We elect MPs. They vote on bills. Should a majority is secured, the bills pass into law. The law is upheld by the courts. Simple as that. However, that’s how it used to work. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, along with the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at offshore tribunals composed of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these panels grant no right of appeal or legal review. You or I are unable to file a case to them, just as our government, including enterprises based in this country. Access is granted only to corporations based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, running into billions.

These sums constitute not tangible damages but money the arbitrators conclude the company could potentially have made. The state might be compelled to abandon its policy. It is hesitant to enacting future policies in that area, for fear of being sued.

A Mechanism Growing Exponentially

Record numbers of disputes are being brought, as companies learn from each other, and private equity fund legal actions in return for a portion of the takings. The result? Sovereignty and popular rule are now 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 enacted by parliaments is that this clause has been inserted – without democratic mandate, and frequently under an atmosphere of extreme secrecy – inside trade treaties.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had no impact on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had granted. Now, this victory could be compromised by an foreign court accountable to only the entities bringing the case.

In August, a company whose final controllers reside in the Cayman Islands filed a lawsuit versus the UK government. Last week a dispute settlement body in Washington DC was set up to adjudicate on it.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to commence operations. We have no idea how much this could amount to. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the national judiciary validates it, then a international entity disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

On the same day that the court on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know scarce of the case at present, but it is highly possible that he may employ the tribunal to contest the restrictions the UK levied against him subsequent to the war in Ukraine. He has already started suing another European state on these grounds, demanding $16bn: an amount representing half state's yearly income. Part of the counsel representing him there? a prominent lawyer, wife of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Risks

Politicians promised that these scenarios wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty upon trade deal and we have never seen a case in the past.” An adviser on this topic described activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “once firms start to realise the authority they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That warning has come to pass. In the current period, fossil fuel and resource corporations have filed a record number of claims against nations rich and poor, contesting – like the example of the UK mine – state efforts to stop global warming. Firms have to date won $114bn via ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP