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Can you reckon our system of government works? It could be something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that’s how it operated in the past. Those days are over.

The Advent of Shadow Tribunals

In the modern era, international firms, and the wealthy individuals who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. The cases take place behind closed doors. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even companies based in this country. Access is granted solely for entities based overseas.

Should an arbitration panel rules that a legislative action may compromise the corporation’s expected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These awards constitute not tangible damages but compensation the panel members conclude the company might otherwise have made. The state might be compelled to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, due to the risk of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being brought, as firms observe each other, and private equity bankroll lawsuits in return for a cut of the settlements. The result? Sovereignty and democracy are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices enacted by parliaments is that this stipulation has been written – without democratic mandate, and frequently under a climate of total confidentiality – into international trade agreements.

A Real-World Case: The UK Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The judge determined that proposals to dig the first new deep coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have no impact on climate commitments. The Labour government later cancelled the permission the Tories had approved. Today, this legal outcome is under threat by an offshore tribunal accountable to exclusively the companies petitioning it.

During August, a corporate entity whose final controllers are located in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in the US capital was set up to consider the case.

The company is suing the UK for the profits it might have made if the mine had been permitted to go ahead. We have no clear indication how much this might be. Who is acting on its behalf against the British government? A sitting MP, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration makes a decision, the domestic court upholds it, then a overseas corporation contests it through an secretive private court, and a sitting MP works for its behalf.

A Sanctions Lawsuit

On the same day that the court on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case so far, but it seems likely that he may employ the arbitration process to challenge the restrictions the UK enacted against him after the Russian aggression. He has filed a claim against another European state for this reason, claiming $16bn: an amount representing half government’s yearly budget. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized oligarchs' funds as security for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that such things could not occur. Years ago, a senior politician, advocating for the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” An expert on this issue labelled activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “as corporations grasp the power bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That prediction is now a reality. This year, oil and gas and resource corporations have filed a record number of claims against nations both wealthy and developing, opposing – as in the case of the UK mine – government attempts to stop environmental catastrophe. Companies have thus far won $114bn through ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP