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Can you reckon our system of government functions? Maybe something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills are enacted as law. The law is upheld by the courts. End of story. However, that was how it used to work. Those days are over.

The Emergence of Shadow Tribunals

Today, foreign corporations, and the billionaires who own them, can sue governments for the policies they pass, at offshore tribunals made up of business advocates. These proceedings are conducted behind closed doors. In contrast to domestic courts, these bodies provide no right of appeal or judicial review. You or I are unable to file a case to them, and neither can our government, including enterprises based in this country. The door is open exclusively to corporations based overseas.

Should an arbitration panel rules that a law or policy may compromise the corporation’s expected profits, it can award compensation of vast sums, running into billions.

This compensation are based not on tangible damages but funds the panel members determine the company might otherwise have made. The state may have to drop the legislation. It is discouraged from introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The result? National sovereignty and democracy are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the choices made by parliaments is that this provision has been written – without public consent, and often in an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Last year, a conservation group won a great victory at the High Court. The justice determined that schemes to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration subsequently revoked the consent the Tories had issued. Currently, this victory faces being overturned by an secret arbitration panel accountable to no one but the companies filing the suit.

In August, a company whose final controllers are located in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in the US capital was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to go ahead. Citizens have little idea how much this might be. Which individual is acting on its behalf against the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The state passes a law, the high court validates it, then a international entity disputes it through an undemocratic arbitration panel, and a elected official represents its behalf.

The Russian Lawsuit

Concurrently that the panel on the coal mine dispute was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK imposed on him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg for this reason, seeking sixteen billion dollars: half that government’s annual revenue. Included in the counsel representing him there? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over sovereign states could be blocking the finance Ukraine urgently requires.

Empty Promises and Escalating Costs

The public was told that these events could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this matter described campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That warning is now a reality. This year, oil and gas and resource corporations have filed a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the UK mine – official measures to stop environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP