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What is your perceive our system of government functions? It could be something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills pass into law. The law are enforced by the courts. Simple as that. However, that was how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, and the billionaires that control them, can sue governments for the laws they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, including companies operating from this country. The door is open exclusively to entities based overseas.

Should an arbitration panel rules that a government measure may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but compensation the tribunal officials decide the company could potentially have made. The administration may have to drop the legislation. It is discouraged from passing future laws in that area, for fear of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of disputes are being brought, as companies observe each other, and investment funds bankroll lawsuits in exchange for a cut of the settlements. The result? Democratic sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the choices enacted by legislatures is that this stipulation has been written – absent public approval, and typically amid an atmosphere of total confidentiality – within international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The judge ruled that proposals to open the first major coal mine in the UK for a generation, in northwest England, were wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The incoming administration subsequently revoked the licence the previous administration had granted. Currently, this victory faces being overturned by an offshore tribunal answering to only the corporations petitioning it.

During August, a company whose beneficial owners reside in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the US capital was established to consider the case.

The company is litigating against the UK for the money it might have made if the mine had been permitted to go ahead. We have no clear indication how much this might be. 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, that great patriot Sir Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a foreign company challenges it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it is highly possible that he may employ the ISDS mechanism to fight the penalties the UK imposed on him following the Russian aggression. He has already started suing another European state with similar intent, seeking sixteen billion dollars: an amount representing half government’s annual revenue. Part of the legal team on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen oligarchs' funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over elected governments might be preventing the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that such things were not possible. Years ago, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this matter accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “once firms start to realise the power they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That warning has come to pass. Recently, fossil fuel and resource corporations have filed a record number of suits against nations across the economic spectrum, challenging – as in the case of the UK mine – government attempts to stop global warming. Companies have so far won $114bn through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP