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Can you understand our system of government works? Perhaps similar to this. We elect MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. That's it. Well, that used to be how it operated in the past. Those days are over.

The Rise of Shadow Tribunals

In the modern era, foreign corporations, and the billionaires that control them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings take place in secret. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. You or I cannot take a case to them, just as our government, including enterprises based in this country. Access is granted exclusively to businesses registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s projected profits, it may order financial penalties of hundreds of millions, even billions.

These awards are based not on tangible damages but funds the tribunal officials conclude the company could potentially have made. The state might be compelled to rescind the measure. It is discouraged from passing future laws along the same lines, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being filed, as corporations observe each other, and hedge funds finance suits for a share of a cut of the awards. The outcome? National sovereignty and democracy are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the choices made by elected bodies is that this provision has been incorporated – absent public approval, and frequently under conditions of profound opacity – inside international trade agreements.

A Specific Case: The Whitehaven Coal Mine

Last year, environmental campaigners secured a significant win at the High Court. The judge found that plans to excavate the first deep coalmine in the UK for three decades, in northwest England, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The Labour government then withdrew the consent the former government had granted. Currently, this victory is under threat by an offshore tribunal answering to no one but the companies filing the suit.

During August, a company whose final controllers are based in the Cayman Islands lodged a claim against the UK government. Last week a tribunal in the US capital was established to hear it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have no idea how much this might be. Who is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a overseas corporation disputes it through an unaccountable private court, and a sitting MP acts on its behalf.

An Oligarch's Challenge

On the same day that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case so far, but it seems likely that he’ll use the tribunal to contest the sanctions the UK enacted against him subsequent to the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, seeking $16bn: equivalent to half of government’s yearly income. Included in the counsel on his side? the wife of a former prime minister, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Growing Costs

Politicians promised that these scenarios were not possible. Years ago, a senior politician, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this matter described activists of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear ISDS claims. Predictions that “once firms begin to understand the authority they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by scepticism.

That threat has now materialised. In the current period, oil and gas and mining firms have initiated a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – government attempts to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP