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How do you understand our political system operates? It could be along the lines of this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills pass into law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it once functioned. Those days are over.

The Emergence of Shadow Tribunals

Today, international firms, along with the oligarchs that control them, have the power to sue governments for the regulations they pass, at private courts staffed by commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these tribunals grant no opportunity to appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even businesses based in this country. The door is open exclusively to entities registered abroad.

Should an arbitration panel finds that a legislative action could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation constitute not tangible damages but funds the arbitrators decide the company would perhaps have made. The state might be compelled to rescind the measure. It will be hesitant to enacting future policies in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Record numbers of cases are being initiated, as corporations observe each other, and investment funds bankroll lawsuits for a share of a portion of the takings. The result? Democratic sovereignty and popular rule are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the rulings enacted by legislatures is that this clause has been incorporated – absent public approval, and often in a climate of profound opacity – within trade treaties.

A Real-World Case: The Whitehaven Coal Mine

Last year, activists won a great victory at the senior court. The presiding officer ruled that proposals to dig the first new deep coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have had zero effect on climate commitments. The new government then withdrew the permission the previous administration had granted. Now, this victory could be compromised by an foreign court accountable to exclusively the entities petitioning it.

During August, a company whose beneficial owners are based in the tax haven filed a lawsuit challenging the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. Who 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 Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a international entity contests it through an unaccountable private court, and a sitting MP represents its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coalmine case was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case so far, but it is highly possible that he will utilise the arbitration process to fight the sanctions the UK levied against him subsequent to the Russian aggression. He has already filed a claim against a small nation with similar intent, seeking sixteen billion dollars: half that nation's yearly income. Included in the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Escalating Risks

Politicians promised that these scenarios could not occur. Years ago, a senior politician, advocating for the biggest and most dangerous of all such treaties, told us: “We’ve signed trade agreement upon trade deal and we have never seen a problem in the past.” A consultant on this topic accused critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “when companies grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with general mockery.

That prediction has come to pass. Recently, energy and extraction companies have filed a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to prevent global warming. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured $84bn. That represents the combined GDP