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Can you understand our system of government operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. However, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

Today, international firms, along with the billionaires who own them, have the power to sue elected administrations for the laws they pass, at offshore tribunals made up of commercial attorneys. These proceedings take place in secret. Unlike our courts, these tribunals grant no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises based in this country. Access is granted solely for corporations registered abroad.

Should an arbitration panel rules that a law or policy could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions, running into billions.

These sums are based not on tangible damages but compensation the arbitrators conclude the company might otherwise have made. The state might be compelled to rescind the measure. It becomes hesitant to passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of disputes are being brought, as corporations observe each other, and hedge funds bankroll lawsuits in exchange for a portion of the takings. The consequence? Sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the rulings made by legislatures is that this provision has been incorporated – absent public approval, and frequently under an atmosphere of total confidentiality – within trade treaties.

A Concrete Case: The Cumbrian Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The judge ruled that plans to excavate the first new deep coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have had no consequence on climate commitments. The incoming administration subsequently revoked the permission the previous administration had granted. Today, this success faces being overturned by an foreign court reporting to only the corporations bringing the case.

In August, a firm whose ultimate owners reside in the tax haven initiated proceedings challenging the UK government. The previous week a arbitration panel in the United States was set up to consider the case.

This firm is suing the UK for the money it would have generated if the mine had received permission to go ahead. The public has little idea how much this sum represents. Which individual is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a international entity contests it through an unaccountable arbitration panel, and a elected official works for its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing a small nation for this reason, seeking a colossal sum: equivalent to half of state's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the funds Ukraine critically depends on.

Misleading Claims and Mounting Risks

The public was told that such things wouldn’t happen. In 2014, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” An expert on this topic accused critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “once firms grasp the influence bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with scepticism.

That warning has come to pass. This year, fossil fuel and mining firms have initiated a unprecedented number of claims against nations across the economic spectrum, contesting – similar to the UK mine – state efforts to halt climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured $84bn. That equates to the combined GDP