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Can you perceive our political system operates? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills become law. Statutes are enforced by the courts. End of story. However, that used to be how it used to work. No longer.

The Rise of Shadow Arbitration Panels

Nowadays, foreign corporations, along with the oligarchs that control them, can sue governments for the regulations they pass, at private courts staffed by corporate lawyers. The cases are held in secret. Differing from national judiciaries, these tribunals provide no opportunity to appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies operating from this country. They are open exclusively to businesses registered abroad.

When a secret court rules that a legislative action might diminish the corporation’s projected profits, it may order damages of hundreds of millions of pounds, potentially billions.

These awards represent not real financial harm but funds the panel members conclude the company could potentially have made. The state could be forced to rescind the measure. It will be discouraged from enacting future policies in that area, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of legal actions are being initiated, as firms take cues from each other, and private equity fund legal actions in return for a share of the takings. The consequence? Sovereignty and popular rule are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the decisions made by legislatures is that this clause has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the High Court. The judge determined that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the consent the former government had granted. Now, this victory could be compromised by an offshore tribunal accountable to no one but the corporations petitioning it.

During August, a firm whose ultimate owners reside in the Cayman Islands lodged a claim challenging the UK government. Last week a tribunal in the US capital was established to hear it.

The company is litigating against the UK for the revenue it might have made if the mine had received permission to commence operations. Citizens have little idea how much this might be. What legal team is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court validates it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he will utilise the tribunal to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has previously filed a claim against another European state on these grounds, demanding a colossal sum: equivalent to half of government’s yearly income. Included in the lawyers on his side? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s delay in utilising seized state funds as security for its financial support package arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states could be blocking the finance Ukraine desperately needs.

False Assurances and Mounting Risks

The public was told that such things could not occur. In 2014, a former prime minister, championing the most significant and hazardous of all such treaties, told us: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic labelled activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “once firms begin to understand the power bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with widespread derision.

That threat has come to pass. In the current period, fossil fuel and extraction companies have filed a unprecedented number of suits against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have thus far won vast sums via ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP