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What is your reckon our political system functions? It could be something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. Well, that was how it used to work. Not anymore.

The Advent of Shadow Tribunals

Today, foreign corporations, and the oligarchs that control them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals composed of business advocates. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels grant no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted solely for entities registered abroad.

When a secret court rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant financial penalties of vast sums, running into billions.

These sums are based not on tangible damages but money the tribunal officials conclude the company might otherwise have made. The government may have to rescind the measure. It is hesitant to passing future laws in that area, worried about facing litigation.

A Process Spiralling Out of Control

Record numbers of cases are being initiated, as firms take cues from each other, and investment funds bankroll lawsuits for a share of a cut of the awards. The result? National sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the decisions enacted by legislatures is that this provision has been written – absent public approval, and frequently under an atmosphere of extreme secrecy – inside trade treaties.

A Specific Instance: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the high court. The justice determined that plans to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration later cancelled the consent the previous administration had granted. Now, this success is under threat by an foreign court accountable to exclusively the corporations filing the suit.

Last August, a company whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. Last week a arbitration panel in Washington DC was established to hear it.

The company is suing 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. What legal team is acting on its behalf against the state? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a international entity contests it through an unaccountable private court, and a member of our parliament works for its behalf.

An Oligarch's Case

On the same day that the court on the coal mine dispute was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he’ll use the arbitration process to challenge the sanctions the UK imposed on him after the invasion of Ukraine. He has previously filed a claim against a small nation on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly income. Part of the counsel representing him there? Cherie Blair, wife of the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen state funds as collateral for its financial support package stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments could be blocking the finance Ukraine urgently requires.

False Assurances and Mounting Threats

Politicians promised that these events were not possible. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, told us: “The UK has signed trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this topic accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries should be concerned by these lawsuits. Predictions that “once firms start to realise the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by scepticism.

That warning is now a reality. This year, oil and gas and mining firms have lodged a unprecedented number of cases against nations across the economic spectrum, contesting – similar to the UK mine – government attempts to prevent global warming. Companies have thus far won $114bn through ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP