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How do you perceive our political system functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills become law. The law is upheld by the courts. That's it. However, that was how it operated in the past. No longer.

The Rise of Shadow Tribunals

Nowadays, overseas companies, or the wealthy individuals who own them, have the power to sue governments for the regulations they pass, at secret arbitration panels composed of corporate lawyers. Such disputes take place in secret. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. Access is granted solely for entities registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation are based not on actual losses but compensation the arbitrators conclude the company would perhaps have made. The government might be compelled to drop the legislation. It will be hesitant to introducing similar legislation in that area, worried about facing litigation.

A Mechanism Running Rampant

Record numbers of disputes are being initiated, as companies learn from each other, and hedge funds fund legal actions in exchange for a cut of the takings. The outcome? Sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the choices taken by legislatures is that this clause has been incorporated – without public consent, and often in a climate of total confidentiality – into trade treaties.

A Real-World Instance: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice ruled that plans to dig the first new deep coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The new government then withdrew the consent the previous administration had granted. Today, this victory is under threat by an secret arbitration panel answering to exclusively the corporations bringing the case.

During August, a company whose beneficial owners reside in the tax haven lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was set up to hear it.

The claimant is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. What legal team is representing it against the British government? An elected representative, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know little of the case so far, but it appears probable that he may employ the arbitration process to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: half that nation's yearly income. Included in the legal team acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts argue that the EU’s procrastination in utilising seized state funds as security for its aid for Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that these scenarios could not occur. Years ago, a government leader, championing the biggest and most dangerous of all such treaties, stated: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An adviser on this matter labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states needed to fear these lawsuits. Predictions that “when companies grasp the authority they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That warning has now materialised. This year, fossil fuel and mining firms have initiated a unprecedented number of claims against nations across the economic spectrum, opposing – like the example of the UK mine – official measures to prevent global warming. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP