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Can you reckon our political system works? Perhaps along the lines of this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. Well, that’s how it once functioned. Those days are over.

The Rise of Shadow Tribunals

Today, foreign corporations, or the billionaires who own them, can sue governments for the regulations they pass, at secret arbitration panels composed of corporate lawyers. The cases take place behind closed doors. Unlike our courts, these tribunals grant no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, including businesses operating from this country. The door is open solely for entities registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s projected profits, it can award compensation of vast sums, even billions.

These sums are based not on real financial harm but funds the tribunal officials decide the company would perhaps have made. The state could be forced to drop the legislation. It is hesitant to passing future laws of a similar nature, due to the risk of being sued.

A Process Growing Exponentially

Record numbers of cases are being filed, as corporations learn from each other, and private equity bankroll lawsuits in exchange for a portion of the awards. The result? Democratic sovereignty and popular rule are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the decisions taken by legislatures is that this clause has been incorporated – absent public approval, and typically amid an atmosphere of extreme secrecy – within bilateral investment treaties.

A Concrete Case: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The presiding officer ruled that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The incoming administration subsequently revoked the licence the previous administration had granted. Currently, this victory is under threat by an foreign court accountable to exclusively the corporations bringing the case.

Last August, a firm whose beneficial owners are based in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. The public has little idea how much this sum represents. Who is serving as its counsel in opposition to the British government? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The government passes a law, the high court upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

The Russian Challenge

Concurrently that the tribunal on the mining lawsuit was established, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case so far, but it appears probable that he’ll use the tribunal to contest the penalties the UK enacted against him following the Russian aggression. He has already started suing Luxembourg on these grounds, demanding sixteen billion dollars: half that state's yearly income. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as collateral for its aid for Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments may be obstructing the funds Ukraine critically depends on.

False Assurances and Growing Costs

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, advocating for the largest and riskiest of all such treaties, stated: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” An expert on this issue accused activists of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “once firms start to realise the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were greeted by general mockery.

That prediction is now a reality. This year, energy and resource corporations have lodged a record number of cases against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to stop climate breakdown. Companies have thus far won vast sums by using ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP