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What is your reckon our political system functions? Perhaps something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Rise of Shadow Tribunals

Nowadays, foreign corporations, or the billionaires that control them, can sue governments for the laws they pass, at private courts staffed by commercial attorneys. These proceedings are held in secret. Unlike our courts, these panels provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even businesses operating from this country. Access is granted solely for entities based overseas.

When a secret court determines that a law or policy may compromise the corporation’s expected profits, it can award compensation of vast sums, even billions.

These awards are based not on actual losses but funds the panel members determine the company would perhaps have made. The administration might be compelled to abandon its policy. It will be hesitant to passing future laws of a similar nature, worried about facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being filed, as firms observe each other, and investment funds bankroll lawsuits in return for a share of the settlements. The result? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings taken by parliaments is that this provision has been written – absent public approval, and often in an atmosphere of total confidentiality – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The justice ruled that schemes to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on climate commitments. The incoming administration then withdrew the permission the former government had approved. Now, this success is under threat by an foreign court accountable to only the entities filing the suit.

Last August, a corporate entity whose ultimate owners are based in the tax haven lodged a claim against the UK government. Last week a tribunal in the US capital was set up to adjudicate on it.

The company is suing the UK for the profits it might have made if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. What legal team is acting on its behalf challenging the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the tribunal on the coal mine dispute was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case to date, but it is highly possible that he may employ the tribunal to challenge the penalties the UK imposed on him subsequent to the war in Ukraine. He has initiated proceedings against Luxembourg for this reason, demanding a colossal sum: equivalent to half of state's annual revenue. Among the lawyers representing him there? Cherie Blair, married to the previous PM.

Trade specialists argue that the EU’s delay in utilising seized Russian assets as guarantee for its financial support package stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Costs

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, championing the largest and riskiest of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this issue described campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “once firms begin to understand the power they now possess, they will redirect their efforts from the poorer states to the developed economies” were greeted by general mockery.

That prediction is now a reality. Recently, oil and gas and resource corporations have lodged a unprecedented number of cases against nations across the economic spectrum, contesting – similar to the Whitehaven project – government attempts to halt global warming. Corporations have so far won $114bn via ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP