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What is your understand our system of government functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills pass into law. Statutes is upheld by the courts. End of story. Yet, that used to be how it used to work. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, international firms, and the billionaires behind them, have the power to sue elected administrations for the policies they pass, at private courts composed of business advocates. These proceedings are held behind closed doors. Unlike our courts, these panels allow no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, or even businesses headquartered in this country. Access is granted only to businesses based overseas.

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

These sums represent not actual losses but funds the tribunal officials determine the company could potentially have made. The administration might be compelled to rescind the measure. It becomes deterred from enacting future policies in that area, due to the risk of being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as corporations take cues from each other, and hedge funds finance suits in return for a share of the takings. The result? National sovereignty and popular rule are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the choices taken by elected bodies is that this clause has been written – without democratic mandate, and typically amid conditions of profound opacity – inside trade treaties.

A Specific Example: The Cumbrian Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The justice ruled that schemes to excavate the first deep coalmine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The Labour government then withdrew the licence the previous administration had issued. Today, this success faces being overturned by an secret arbitration panel reporting to only the entities filing the suit.

During August, a corporate entity whose beneficial owners are based in the Cayman Islands initiated proceedings against the UK government. The previous week a tribunal in Washington DC was convened to consider the case.

The company is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. We have no clear indication how much this sum represents. What legal team is acting on its behalf challenging the UK administration? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a foreign company disputes it through an secretive private court, and a sitting MP represents its behalf.

The Russian Case

Simultaneously that the court on the mining lawsuit was established, 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 nothing of the case so far, but it appears probable that he will utilise the arbitration process to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has previously filed a claim against a small nation on these grounds, demanding $16bn: equivalent to half of government’s yearly budget. Part of the counsel acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

Misleading Claims and Mounting Threats

Politicians promised that these events could not occur. Years ago, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “We’ve signed investment treaty upon trade deal and there has not been a case in the past.” A consultant on this matter accused critics of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were met with general mockery.

That threat is now a reality. Recently, oil and gas and extraction companies have filed a record number of suits against nations rich and poor, challenging – as in the case of the Whitehaven project – government attempts to halt global warming. Firms have so far won vast sums through ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP