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How do you understand our system of government operates? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. No longer.

The Rise of Shadow Tribunals

In the modern era, overseas companies, or the billionaires behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels made up of corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these tribunals grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted exclusively to entities based overseas.

Should an arbitration panel determines that a law or policy could harm the corporation’s expected profits, it may order compensation of hundreds of millions, even billions.

These awards are based not on actual losses but money the panel members determine the company could potentially have made. The administration could be forced to abandon its policy. It becomes deterred from passing future laws of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being filed, as firms observe each other, and investment funds bankroll lawsuits in return for a portion of the awards. The consequence? Sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the decisions enacted by parliaments is that this provision has been incorporated – without public consent, and typically amid an atmosphere of extreme secrecy – into trade treaties.

A Specific Case: The Whitehaven Coalmine

Last year, a conservation group secured a significant win at the High Court. The justice determined that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, were wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine could have zero effect on climate commitments. The Labour government later cancelled the permission the former government had approved. Currently, this success could be compromised by an foreign court answering to only the companies bringing the case.

In August, a corporate entity whose final controllers are located in the tax haven lodged a claim challenging the UK government. Last week a tribunal in the US capital was set up to hear it.

The claimant is suing the UK for the money it could have earned if the mine had been allowed to commence operations. We have no idea how much this sum represents. Who is representing it in opposition to the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a international entity contests it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the court on the coal mine dispute was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case to date, but it seems likely that he may employ the arbitration process to fight the restrictions the UK levied against him subsequent to the war in Ukraine. He has already filed a claim against a small nation with similar intent, claiming $16bn: half that state's yearly income. Part of the counsel representing him there? Cherie Blair, married to the ex-UK leader.

International law scholars believe that the EU’s delay in using frozen state funds as security for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the finance Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that these events could not occur. In 2014, a government leader, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this topic described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations needed to fear these lawsuits. Warnings that “when companies grasp the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were dismissed with general mockery.

That threat has come to pass. In the current period, fossil fuel and resource corporations have initiated a historic level of suits against nations across the economic spectrum, contesting – similar to the Whitehaven project – government attempts to prevent climate breakdown. Corporations have to date won $114bn through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP