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Can you perceive our political system works? It could be similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Statutes is upheld by the courts. That's it. Well, that was how it operated in the past. Not anymore.

The Emergence of Shadow Arbitration Panels

Today, international firms, and the billionaires behind them, can sue governments for the regulations they pass, at private courts composed of commercial attorneys. Such disputes take place behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even businesses based in this country. Access is granted only to entities registered abroad.

If a tribunal finds that a law or policy might diminish the corporation’s expected profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation constitute not actual losses but money the panel members determine the company would perhaps have made. The administration may have to drop the legislation. It becomes hesitant to enacting future policies in that area, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of disputes are being initiated, as corporations take cues from each other, and hedge funds fund legal actions for a share of a share of the settlements. The outcome? National sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions made by legislatures is that this stipulation has been written – without democratic mandate, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The justice found that schemes to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine could have zero effect on climate commitments. The new government then withdrew the consent the former government had approved. Currently, this legal outcome could be compromised by an foreign court answering to only the corporations filing the suit.

In August, a company whose beneficial owners are based in the tax haven lodged a claim against the UK government. Last week a dispute settlement body in the United States was established to adjudicate on it.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to proceed. Citizens have little idea how much this might be. What legal team is acting on its behalf in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the high court supports it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to fight the sanctions the UK enacted against him following the war in Ukraine. He has previously started suing Luxembourg with similar intent, claiming sixteen billion dollars: half that nation's annual revenue. Part of the legal team representing him there? a prominent lawyer, spouse of the former British prime minister.

Trade specialists contend that the EU’s procrastination in leveraging immobilised state funds as security for its aid for Ukraine stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over sovereign states could be blocking the money Ukraine urgently requires.

Empty Promises and Growing Risks

We were assured that such things were not possible. In 2014, a government leader, championing the most significant and hazardous of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this matter described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations had to worry about such legal actions. Warnings that “when companies start to realise the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That threat is now a reality. Recently, energy and extraction companies have lodged a historic level of claims against nations both wealthy and developing, contesting – like the example of the UK mine – official measures to halt climate breakdown. Companies have to date won $114bn by using ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP