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Can you perceive our system of government works? Maybe along the lines of this. We elect MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. That's it. However, that was how it once functioned. No longer.

The Advent of Shadow Tribunals

Today, foreign corporations, or the oligarchs who own them, can sue nation states for the regulations they pass, at offshore tribunals composed of commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these tribunals provide no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. Access is granted exclusively to entities registered abroad.

Should an arbitration panel rules that a legislative action could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions, potentially billions.

This compensation constitute not real financial harm but funds the tribunal officials decide the company would perhaps have made. The state might be compelled to drop the legislation. It will be deterred from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A System Running Rampant

Historically high figures of legal actions are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The outcome? National sovereignty and popular rule are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the rulings made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and often in conditions of profound opacity – within international trade agreements.

A Concrete Example: The UK Coal Mine

A year ago, activists secured a significant win at the senior court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have no consequence on national carbon targets. The new government later cancelled the permission the Tories had approved. Currently, this success could be compromised by an secret arbitration panel reporting to only the companies filing the suit.

During August, a corporate entity whose beneficial owners reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had received permission to commence operations. Citizens have no idea how much this might be. Which individual is acting on its behalf in opposition to the state? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The government passes a law, the national judiciary upholds it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was appointed, 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 at present, but it is highly possible that he may employ the tribunal to fight the penalties the UK enacted against him following the Russian aggression. He has previously started suing Luxembourg for this reason, demanding $16bn: half that state's yearly budget. Included in the lawyers on his side? Cherie Blair, married to the previous PM.

International law scholars believe that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that these scenarios wouldn’t happen. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, told us: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” An adviser on this issue labelled activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations should be concerned by such legal actions. Warnings that “once firms begin to understand the power bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction has come to pass. In the current period, oil and gas and mining firms have filed a unprecedented number of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to halt climate breakdown. Companies have so far won vast sums through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP