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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 secured, the bills become law. Statutes is maintained by the courts. That's it. Yet, that used to be how it used to work. Those days are over.

The Emergence of Shadow Tribunals

Nowadays, foreign corporations, along with the billionaires behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of commercial attorneys. The cases take place away from public scrutiny. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, including businesses headquartered in this country. Access is granted exclusively to businesses based overseas.

When a secret court determines that a legislative action may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These awards constitute not tangible damages but funds the arbitrators decide the company could potentially have made. The administration could be forced to rescind the measure. It will be discouraged from introducing similar legislation along the same lines, for fear of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies take cues from each other, and hedge funds finance suits for a share of a share of the settlements. The consequence? Sovereignty and popular rule are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the choices enacted by elected bodies is that this clause has been inserted – without democratic mandate, and frequently under conditions of extreme secrecy – within trade treaties.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the high court. The justice found that schemes to excavate the first new deep coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have had zero effect on national carbon targets. The new government subsequently revoked the permission the previous administration had granted. Today, this success could be compromised by an secret arbitration panel accountable to exclusively the entities filing the suit.

During August, a company whose beneficial owners reside in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to commence operations. We have little idea how much this sum represents. Which individual is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The administration makes a decision, the domestic court upholds it, then a international entity contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case at present, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously filed a claim against another European state for this reason, seeking sixteen billion dollars: an amount representing half nation's annual revenue. Among the counsel representing him there? a prominent lawyer, wife of the former British prime minister.

Trade specialists contend that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios were not possible. Previously, a former prime minister, promoting the biggest and most dangerous of all these agreements, stated: “We’ve signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this issue accused activists of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries needed to fear such legal actions. Warnings that “as corporations begin to understand the influence they’ve been granted, they will turn their attention from the poorer states to the developed economies” were greeted by scepticism.

That warning is now a reality. In the current period, energy and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to halt global warming. Corporations have thus far won vast sums via ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP