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Can you understand our political system works? It could be similar to this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that was how it used to work. Those days are over.

The Emergence of Shadow Tribunals

Today, international firms, and the wealthy individuals that control them, have the power to sue governments for the regulations they pass, at private courts staffed by commercial attorneys. These proceedings take place behind closed doors. Differing from national judiciaries, these panels allow no avenue for appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even companies based in this country. They are open solely for corporations registered abroad.

If a tribunal determines that a legislative action might diminish the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

This compensation represent not actual losses but funds the panel members conclude the company would perhaps have made. The government might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as companies observe each other, and hedge funds finance suits in return for a portion of the awards. The result? National sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the rulings made by elected bodies is that this clause has been inserted – absent public approval, and frequently under an atmosphere of extreme secrecy – inside international trade agreements.

A Real-World Case: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the High Court. The presiding officer determined that plans to open the first deep coalmine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the consent the Tories had granted. Today, this success is under threat by an offshore tribunal reporting to exclusively the companies petitioning it.

Last August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in the US capital was set up to adjudicate on it.

The claimant is suing the UK for the revenue it could have earned if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. What legal team is representing it against the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a overseas corporation contests it through an unaccountable arbitration panel, and a elected official represents its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he’ll use the arbitration process to contest the sanctions the UK enacted against him after the Russian aggression. He has previously filed a claim against another European state on these grounds, claiming $16bn: an amount representing half state's yearly budget. Part of the counsel on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over elected governments could be blocking the money Ukraine urgently requires.

False Assurances and Growing Risks

Politicians promised that such things wouldn’t happen. In 2014, a senior politician, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade agreement upon trade deal and there has not been a problem in the past.” An adviser on this issue accused critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms start to realise the influence they now possess, they will turn their attention from the poorer states to the wealthy nations” were greeted by general mockery.

That warning has come to pass. In the current period, fossil fuel and resource corporations have lodged a unprecedented number of suits against nations both wealthy and developing, opposing – like the example of the UK mine – state efforts to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP