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What is your understand our political system functions? Perhaps along the lines of this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Legislation is upheld by the courts. That's it. However, that was how it used to work. Those days are over.

The Advent of Shadow Tribunals

Today, international firms, along with the wealthy individuals that control them, have the power to sue governments for the regulations they pass, at private courts staffed by corporate lawyers. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, including businesses based in this country. The door is open exclusively to entities registered abroad.

If a tribunal determines that a law or policy may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions, potentially billions.

These sums represent not tangible damages but money the panel members determine the company might otherwise have made. The administration might be compelled to abandon its policy. It will be hesitant to introducing similar legislation of a similar nature, due to the risk of being sued.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The result? National sovereignty and democracy are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the choices made by legislatures is that this clause has been written – without public consent, and often in an atmosphere of extreme secrecy – within bilateral investment treaties.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge found that plans to open the first major coal mine in the UK for three decades, in northwest England, were unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have had no impact on national carbon targets. The new government then withdrew the permission the former government had approved. Today, this legal outcome is under threat by an secret arbitration panel reporting to exclusively the entities filing the suit.

In August, a company whose ultimate owners are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was convened to consider the case.

The company is seeking compensation from the UK for the profits it could have earned if the mine had received permission to go ahead. The public has little idea how much this might be. Who is representing it against the state? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The government makes a decision, the domestic court upholds it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

Concurrently that the panel on the coal mine dispute was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case so far, but it seems likely that he’ll use the ISDS mechanism to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has started suing a small nation with similar intent, demanding $16bn: half that state's yearly budget. Among the lawyers representing him there? Cherie Blair, married to the previous PM.

International law scholars argue that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Escalating Threats

The public was told that these scenarios were not possible. In 2014, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this issue described campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the authority they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning is now a reality. Recently, energy and extraction companies have initiated a historic level of claims against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to prevent climate breakdown. Companies have so far won vast sums via ISDS, of which energy giants have obtained the majority. That equates to the combined GDP