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How do you reckon our political system operates? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Well, that used to be how it once functioned. Those days are over.

The Advent of Shadow Tribunals

Today, overseas companies, and the billionaires behind them, can sue elected administrations for the regulations they pass, at offshore tribunals staffed by business advocates. The cases are held away from public scrutiny. Unlike our courts, these bodies provide no right of appeal or legal review. The general public are unable to file a case to them, just as our government, or even businesses based in this country. The door is open solely for businesses based overseas.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions, even billions.

These sums represent not real financial harm but compensation the tribunal officials determine the company could potentially have made. The state may have to rescind the measure. It will be deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations take cues from each other, and hedge funds finance suits for a share of a share of the takings. The result? Sovereignty and popular rule are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the choices made by elected bodies is that this stipulation has been written – without democratic mandate, and frequently under a climate of profound opacity – within trade treaties.

A Real-World Instance: The Whitehaven Coalmine

A year ago, activists won a great victory at the High Court. The judge ruled that schemes to open the first major coal mine in the UK for three decades, in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have no consequence on climate commitments. The Labour government later cancelled the consent the previous administration had granted. Today, this legal outcome could be compromised by an secret arbitration panel answering to no one but the entities filing the suit.

In August, a company whose beneficial owners reside in the tax haven filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was set up to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to go ahead. We have no idea how much this might be. What legal team is representing it in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The government passes a law, the high court supports it, then a international entity contests it through an unaccountable private court, and a elected official works for its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coalmine case was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case at present, but it appears probable that he will utilise the tribunal to contest the sanctions the UK enacted against him following the Russian aggression. He has previously initiated proceedings against another European state on these grounds, claiming $16bn: equivalent to half of government’s annual revenue. Included in the lawyers acting for him in that case? the wife of a former prime minister, married to the previous PM.

Trade specialists believe that the EU’s delay in utilising seized oligarchs' funds as security for its aid for Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Threats

Politicians promised that these events wouldn’t happen. Previously, a senior politician, championing the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and there has never been a issue in the past.” A consultant on this topic labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with scepticism.

That prediction has now materialised. In the current period, oil and gas and mining firms have filed a record number of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to stop global warming. Corporations have to date won vast sums via ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP