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How do you understand our system of government operates? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law are enforced by the courts. End of story. Yet, that’s how it once functioned. No longer.

The Advent of Shadow Tribunals

Nowadays, overseas companies, along with the oligarchs behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases are held away from public scrutiny. Unlike our courts, these bodies allow no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, including companies based in this country. They are open solely for entities registered abroad.

If a tribunal finds that a law or policy may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but funds the panel members decide the company might otherwise have made. The state may have to rescind the measure. It is deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms observe each other, and hedge funds bankroll lawsuits for a share of a cut of the takings. The consequence? Democratic sovereignty and democracy are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the choices taken by parliaments is that this provision has been inserted – absent public approval, and frequently under a climate of profound opacity – into bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, activists won a great victory at the High Court. The presiding officer found that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no consequence on our carbon budgets. The Labour government later cancelled the permission the previous administration had issued. Currently, this victory could be compromised by an secret arbitration panel reporting to only the companies filing the suit.

In August, a firm whose beneficial owners reside in the tax haven lodged a claim challenging the UK government. Recently a dispute settlement body in Washington DC was established to adjudicate on it.

The company is litigating against the UK for the money it might have made if the mine had been permitted to go ahead. Citizens have no clear indication how much this might be. What legal team is acting on its behalf challenging the UK administration? An elected representative, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coalmine case was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the penalties the UK imposed on him following the war in Ukraine. He has previously initiated proceedings against another European state with similar intent, demanding $16bn: an amount representing half state's yearly budget. Included in the counsel on his side? Cherie Blair, spouse of the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Threats

We were assured that these scenarios were not possible. Previously, a senior politician, championing the biggest and most dangerous of all these agreements, told us: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An adviser on this issue accused critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “when companies start to realise the power they now possess, they will redirect their efforts from the poorer states to the developed economies” were dismissed with general mockery.

That threat has come to pass. This year, oil and gas and mining firms have filed a record number of cases against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – government attempts to halt global warming. Corporations have to date won vast sums via ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP