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How do you reckon our political system works? Maybe along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. Well, that was how it used to work. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, international firms, or the billionaires who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. The cases are conducted in secret. Unlike our courts, these tribunals allow no right of appeal or legal review. You or I are unable to file a case to them, just as our government, or even businesses operating from this country. Access is granted solely for corporations based overseas.

When a secret court rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not real financial harm but funds the panel members determine the company would perhaps have made. The administration may have to rescind the measure. It will be hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations observe each other, and hedge funds finance suits in exchange for a share of the settlements. The result? National sovereignty and democratic governance are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the rulings made by legislatures is that this clause has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – into international trade agreements.

A Concrete Example: The UK Coalmine

Last year, a conservation group won a great victory at the senior court. The judge ruled that schemes to open the first deep coalmine in the UK for three decades, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have had zero effect on national carbon targets. The new government subsequently revoked the licence the previous administration had granted. Today, this success could be compromised by an foreign court accountable to no one but the corporations petitioning it.

During August, a firm whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in the United States was set up to adjudicate on it.

The company is suing the UK for the money it might have made if the mine had received permission to commence operations. Citizens have no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a foreign company disputes it through an unaccountable private court, and a elected official represents its behalf.

A Sanctions Challenge

On the same day that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case to date, but it seems likely that he’ll use the arbitration process to fight the restrictions the UK imposed on him following the war in Ukraine. He has previously initiated proceedings against Luxembourg for this reason, demanding a colossal sum: an amount representing half nation's yearly income. Among the counsel representing him there? a prominent lawyer, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in utilising seized state funds as security for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

Empty Promises and Mounting Threats

The public was told that such things could not occur. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An adviser on this topic labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted 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 turn their attention from the weak nations to the developed economies” were dismissed with widespread derision.

That prediction is now a reality. Recently, energy and mining firms have lodged a historic level of suits against nations rich and poor, contesting – as in the case of the Whitehaven project – state efforts to stop global warming. Corporations have thus far won $114bn via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP