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What is your perceive our system of government works? Maybe similar to this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. However, that used to be how it used to work. Those days are over.

The Rise of Shadow Tribunals

In the modern era, overseas companies, or the wealthy individuals who own them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels made up of corporate lawyers. Such disputes take place away from public scrutiny. Differing from national judiciaries, these tribunals provide 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 only to entities based overseas.

If a tribunal rules that a law or policy may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

These awards are based not on real financial harm but funds the panel members determine the company could potentially have made. The state may have to drop the legislation. It will be discouraged from introducing similar legislation of a similar nature, for fear of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as firms observe each other, and private equity fund legal actions for a share of a cut of the awards. The outcome? National sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the rulings taken by elected bodies is that this provision has been incorporated – absent public approval, and typically amid conditions of total confidentiality – within international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The justice found that schemes to open the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on national carbon targets. The new government later cancelled the licence the Tories had approved. Today, this legal outcome is under threat by an foreign court answering to only the companies petitioning it.

In August, a company whose beneficial owners are based in the Cayman Islands filed a lawsuit against the UK government. Last week a dispute settlement body in the United States was convened to consider the case.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to commence operations. The public has little idea how much this could amount to. Which individual is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The administration enacts a policy, the high court upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coalmine case was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case so far, but it seems likely that he will utilise the tribunal to contest the restrictions the UK enacted against him after the Russian aggression. He has started suing Luxembourg for this reason, demanding $16bn: half that nation's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the previous PM.

International law scholars contend that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

Empty Promises and Growing Threats

We were assured that these events were not possible. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An adviser on this topic described critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Predictions that “as corporations grasp the authority they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with scepticism.

That prediction is now a reality. This year, fossil fuel and resource corporations have initiated a unprecedented number of cases against nations rich and poor, opposing – like the example of the Whitehaven project – state efforts to prevent global warming. Firms have thus far won $114bn through ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP