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What is your perceive our political system functions? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes is maintained by the courts. That's it. Well, that’s how it used to work. Those days are over.

The Emergence of Shadow Tribunals

Today, international firms, and the billionaires that control them, are able to litigate against nation states for the laws they pass, at private courts composed of corporate lawyers. Such disputes are held in secret. Unlike our courts, these tribunals provide no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, or even companies based in this country. They are open exclusively to corporations registered abroad.

Should an arbitration panel finds that a government measure may compromise the corporation’s projected profits, it can award financial penalties of vast sums, potentially billions.

This compensation represent not actual losses but money the panel members conclude the company could potentially have made. The state could be forced to abandon its policy. It becomes discouraged 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 brought, as corporations take cues from each other, and private equity fund legal actions in exchange for a cut of the settlements. The consequence? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices enacted by legislatures is that this stipulation has been incorporated – absent public approval, and often in a climate of total confidentiality – inside trade treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The presiding officer determined that plans to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have no consequence on national carbon targets. The new government later cancelled the permission the former government had issued. Today, this success is under threat by an foreign court answering to exclusively the corporations petitioning it.

Last August, a company whose ultimate owners reside in the tax haven filed a lawsuit versus the UK government. Last week a tribunal in the US capital was convened to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. Which individual is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a international entity contests it through an unaccountable private court, and a member of our parliament works for its behalf.

A Sanctions Case

Concurrently that the court on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case to date, but it appears probable that he’ll use the tribunal to fight the restrictions the UK levied against him following the Russian aggression. He has already initiated proceedings against another European state with similar intent, seeking $16bn: half that government’s annual revenue. Among the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists argue that the EU’s delay in using frozen oligarchs' funds as security for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states might be preventing the finance Ukraine urgently requires.

Misleading Claims and Growing Risks

We were assured that these events could not occur. Years ago, a senior politician, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An expert on this matter labelled activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “when companies grasp the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That warning is now a reality. This year, oil and gas and extraction companies have filed a historic level of claims against nations across the economic spectrum, opposing – similar to the UK mine – official measures to stop global warming. Companies have so far won $114bn by using ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP