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Can you understand our political system operates? It could be something like this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. The law is upheld by the courts. That's it. However, that used to be how it used to work. No longer.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, or the billionaires behind them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these panels grant no avenue for appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including enterprises operating from this country. Access is granted exclusively to corporations based overseas.

When a secret court finds that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

These awards constitute not tangible damages but compensation the panel members determine the company might otherwise have made. The administration might be compelled to rescind the measure. It will be discouraged from enacting future policies in that area, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as companies learn from each other, and hedge funds fund legal actions in exchange for a portion of the settlements. The consequence? Sovereignty and democratic governance are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions taken by parliaments is that this provision has been inserted – absent public approval, and often in an atmosphere of profound opacity – inside international trade agreements.

A Specific Example: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the high court. The justice determined that plans to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the licence the Tories had approved. Now, this success could be compromised by an foreign court answering to only the entities petitioning it.

Last August, a firm whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. Recently a tribunal in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to proceed. The public has little idea how much this sum represents. Who is representing it challenging the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The administration passes a law, the high court upholds it, then a international entity contests it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the penalties the UK levied against him after the war in Ukraine. He has previously started suing a small nation on these grounds, demanding $16bn: equivalent to half of state's yearly income. Part of the lawyers acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists argue that the EU’s delay in utilising seized state funds as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over democratic administrations may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Risks

Politicians promised that these events wouldn’t happen. In 2014, a former prime minister, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this matter accused campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies begin to understand the influence bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were greeted by general mockery.

That threat has come to pass. This year, oil and gas and extraction companies have lodged a record number of cases against nations across the economic spectrum, contesting – like the example of the UK mine – government attempts to halt global warming. Firms have thus far won vast sums by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP