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How do you reckon our political system operates? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. End of story. Yet, that used to be how it used to work. Those days are over.

The Advent of Shadow Tribunals

Nowadays, overseas companies, or the billionaires behind them, can sue nation states for the laws they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place away from public scrutiny. Differing from national judiciaries, these tribunals grant no right of appeal or judicial review. The general public cannot take a case to them, just as our government, or even companies based in this country. The door is open solely for businesses registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards constitute not real financial harm but funds the panel members determine the company would perhaps have made. The state may have to rescind the measure. It is hesitant to introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as corporations take cues from each other, and investment funds finance suits for a share of a portion of the settlements. The consequence? National sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the rulings made by parliaments is that this stipulation has been written – without public consent, and frequently under conditions of profound opacity – inside international trade agreements.

A Concrete Example: The UK Coalmine

Twelve months ago, a conservation group won a great victory at the High Court. The judge determined that proposals to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no impact on national carbon targets. The new government subsequently revoked the permission the Tories had issued. Currently, this success is under threat by an secret arbitration panel reporting to only the entities petitioning it.

In August, a firm whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a arbitration panel in Washington DC was set up to adjudicate on it.

This firm is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. We have no clear indication how much this sum represents. Which individual is acting on its behalf against the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The state makes a decision, the national judiciary upholds it, then a international entity contests it through an secretive arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case at present, but it appears probable that he may employ the arbitration process to contest the penalties the UK enacted against him following the invasion of Ukraine. He has already filed a claim against a small nation with similar intent, seeking a colossal sum: half that state's annual revenue. Part of the legal team acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

International law scholars contend that the EU’s delay in leveraging immobilised Russian assets as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that such things could not occur. In 2014, a government leader, championing the biggest and most dangerous of all such treaties, declared: “We’ve signed investment treaty upon trade deal and there has not been a problem in the past.” A consultant on this topic described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “once firms grasp the influence they’ve been granted, they will turn their attention from the poorer states to the strong ones” were dismissed with widespread derision.

That prediction is now a reality. In the current period, oil and gas and resource corporations have lodged a record number of claims against nations rich and poor, opposing – similar to the Whitehaven project – state efforts to prevent climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP