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What is your perceive our political system functions? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills become law. Statutes are enforced by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Advent of Shadow Arbitration Panels

Today, overseas companies, and the billionaires behind them, have the power to sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes are conducted away from public scrutiny. Unlike our courts, these bodies grant no right of appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, or even companies operating from this country. They are open exclusively to businesses based overseas.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions, running into billions.

These awards constitute not actual losses but money the tribunal officials conclude the company would perhaps have made. The state could be forced to abandon its policy. It is hesitant to passing future laws along the same lines, worried about facing litigation.

A Process Growing Exponentially

Record numbers of cases are being brought, as firms observe each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The result? Sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the choices taken by legislatures is that this stipulation has been written – absent public approval, and often in an atmosphere of extreme secrecy – into international trade agreements.

A Concrete Example: The UK Coal Mine

Last year, activists won a great victory at the high court. The presiding officer ruled that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government later cancelled the licence the former government had approved. Currently, this victory is under threat by an foreign court accountable to exclusively the companies bringing the case.

During August, a company whose ultimate owners reside in the Cayman Islands initiated proceedings against the UK government. Last week a tribunal in the US capital was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. Citizens have no idea how much this sum represents. Who is serving as its counsel in opposition to the state? A sitting MP, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a foreign company disputes it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the coalmine case was established, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case so far, but it appears probable that he’ll use the arbitration process to fight the penalties the UK enacted against him after the war in Ukraine. He has filed a claim against Luxembourg on these grounds, seeking $16bn: half that government’s yearly income. Included in the legal team on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s delay in using frozen state funds as collateral for its financial support package is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that such things wouldn’t happen. In 2014, a government leader, promoting the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An expert on this topic described campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “when companies grasp the authority they now possess, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That warning has now materialised. This year, energy and extraction companies have initiated a record number of claims against nations across the economic spectrum, challenging – similar to the Whitehaven project – government attempts to stop climate breakdown. Corporations have so far won vast sums through ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP