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What is your understand our political system operates? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. The law are enforced by the courts. End of story. Yet, that used to be how it used to work. No longer.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, along with the oligarchs who own them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals composed of business advocates. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these tribunals provide no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, including businesses operating from this country. They are open only to entities based overseas.

If a tribunal rules that a law or policy may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

This compensation constitute not actual losses but money the tribunal officials decide the company could potentially have made. The administration may have to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as companies observe each other, and private equity bankroll lawsuits for a share of a share of the awards. The outcome? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings taken by parliaments is that this clause has been incorporated – absent public approval, and frequently under conditions of profound opacity – inside bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the High Court. The judge found that plans to excavate the first deep coalmine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the permission the previous administration had approved. Currently, this legal outcome faces being overturned by an foreign court answering to only the corporations petitioning it.

In August, a corporate entity whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. The previous week a tribunal in Washington DC was convened to hear it.

The claimant is suing the UK for the revenue it would have generated if the mine had been permitted to go ahead. Citizens have little idea how much this could amount to. What legal team is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a international entity contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Case

On the same day that the panel on the coal mine dispute was established, it was revealed 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’ll use the arbitration process to challenge the penalties the UK enacted against him subsequent to the war in Ukraine. He has already started suing another European state for this reason, demanding $16bn: equivalent to half of state's yearly budget. Included in the lawyers representing him there? Cherie Blair, wife of the previous PM.

Trade specialists believe that the EU’s delay in utilising seized Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

Empty Promises and Growing Risks

Politicians promised that these scenarios wouldn’t happen. Previously, a government leader, promoting the most significant and hazardous of all these agreements, declared: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this matter accused campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Warnings that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. Recently, oil and gas and mining firms have initiated a record number of cases against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – government attempts to stop global warming. Firms have so far won vast sums by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP