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How do you understand our system of government functions? Perhaps similar to this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills pass into law. Statutes is upheld by the courts. That's it. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, international firms, and the billionaires that control them, have the power to sue nation states for the policies they pass, at private courts staffed by business advocates. These proceedings are conducted behind closed doors. Differing from national judiciaries, these panels grant no avenue for appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even businesses operating from this country. The door is open only to corporations registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s expected profits, it may order damages of vast sums, potentially billions.

This compensation constitute not tangible damages but funds the tribunal officials determine the company could potentially have made. The government could be forced to abandon its policy. It is hesitant to introducing similar legislation along the same lines, worried about being sued.

A Process Growing Exponentially

Unprecedented levels of cases are being filed, as corporations observe each other, and hedge funds fund legal actions in exchange for a share of the takings. The consequence? Sovereignty and democracy are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the choices enacted by legislatures is that this stipulation has been written – absent public approval, and often in a climate of profound opacity – inside trade treaties.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The presiding officer determined that plans to excavate the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government later cancelled the licence the previous administration had granted. Now, this success faces being overturned by an foreign court answering to only the companies petitioning it.

In August, a company whose ultimate owners reside in the offshore financial centre initiated proceedings against the UK government. Recently a dispute settlement body in the United States was established to consider the case.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has little idea how much this could amount to. Who is serving as its counsel in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The state enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

Simultaneously that the court on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case to date, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK levied against him following the Russian aggression. He has already filed a claim against another European state with similar intent, demanding a colossal sum: equivalent to half of state's yearly income. Part of the lawyers representing him there? a prominent lawyer, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that such things were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all these agreements, declared: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this issue accused critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “as corporations grasp the influence they now possess, they will shift their focus from the weak nations to the strong ones” were greeted by widespread derision.

That prediction has come to pass. This year, oil and gas and extraction companies have lodged a unprecedented number of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to stop global warming. Companies have to date won $114bn by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP