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How do you understand our political system functions? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is maintained by the courts. That's it. Well, that’s how it used to work. Those days are over.

The Rise of Shadow Tribunals

In the modern era, international firms, and the wealthy individuals who own them, can sue nation states for the policies they pass, at offshore tribunals made up of business advocates. Such disputes take place behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, or even businesses operating from this country. Access is granted only to corporations based overseas.

When a secret court rules that a legislative action might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, even billions.

This compensation are based not on actual losses but money the tribunal officials determine the company could potentially have made. The government could be forced to rescind the measure. It is deterred from passing future laws in that area, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in return for a cut of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the decisions made by parliaments is that this clause has been inserted – without public consent, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Real-World Example: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The justice ruled that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had endorsed the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration later cancelled the consent the previous administration had issued. Today, this legal outcome faces being overturned by an offshore tribunal reporting to no one but the corporations bringing the case.

In August, a corporate entity whose ultimate owners are based in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in the US capital was established to adjudicate on it.

The company is seeking compensation from the UK for the money it might have made if the mine had received permission to go ahead. We have no clear indication how much this could amount to. Which individual is serving as its counsel in opposition to the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a foreign company contests it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

On the same day that the panel on the coal mine dispute was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK enacted against him following the war in Ukraine. He has previously started suing Luxembourg on these grounds, claiming a colossal sum: an amount representing half state's yearly budget. Among the lawyers on his side? a prominent lawyer, wife of the previous PM.

Trade specialists believe that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine urgently requires.

Empty Promises and Growing Threats

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this issue accused campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Predictions that “as corporations grasp the power they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That warning is now a reality. In the current period, energy and resource corporations have lodged a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – official measures to halt climate breakdown. Firms have to date won vast sums by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP