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How do you reckon our political system operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills pass into law. The law is maintained by the courts. That's it. However, that used to be how it once functioned. No longer.

The Emergence of Shadow Tribunals

Today, overseas companies, and the oligarchs that control them, can sue governments for the policies they pass, at offshore tribunals composed of commercial attorneys. These proceedings take place behind closed doors. Unlike our courts, these panels provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, including enterprises headquartered in this country. The door is open solely for corporations registered abroad.

Should an arbitration panel finds that a legislative action may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, even billions.

These sums constitute not tangible damages but funds the tribunal officials determine the company might otherwise have made. The government might be compelled to rescind the measure. It is hesitant to passing future laws of a similar nature, for fear of being sued.

A Process Growing Exponentially

Record numbers of disputes are being brought, as firms learn from each other, and investment funds bankroll lawsuits for a share of a share of the awards. The consequence? Democratic sovereignty and democracy are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings made by elected bodies is that this provision has been incorporated – without public consent, and frequently under a climate of profound opacity – inside international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The judge found that plans to dig the first deep coalmine in the UK for a generation, in Cumbria, were wrongly permitted by the previous government, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The Labour government then withdrew the licence the previous administration had issued. Now, this success faces being overturned by an offshore tribunal reporting to exclusively the entities bringing the case.

In August, a company whose beneficial owners are located in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in the US capital was convened to consider the case.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this might be. What legal team is representing it in opposition to the state? A sitting MP, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case to date, but it is highly possible that he may employ the tribunal to contest the penalties the UK levied against him after the Russian aggression. He has previously filed a claim against Luxembourg on these grounds, demanding a colossal sum: half that state's annual revenue. Among the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as guarantee for its financial support package is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine urgently requires.

Misleading Claims and Growing Risks

Politicians promised that such things could not occur. Previously, a senior politician, promoting the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade agreement upon trade deal and we have never seen a issue in the past.” An adviser on this matter accused campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “when companies grasp the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. Recently, energy and resource corporations have initiated a record number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to stop global warming. Corporations have to date won vast sums through ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP