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How do you understand our political system operates? Maybe along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. The law are enforced by the courts. Simple as that. Yet, that was how it once functioned. No longer.

The Advent of Shadow Tribunals

In the modern era, international firms, or the oligarchs that control them, have the power to sue nation states for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are held behind closed doors. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even businesses based in this country. The door is open solely for entities operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, even billions.

This compensation represent not real financial harm but compensation the arbitrators conclude the company might otherwise have made. The state may have to abandon its policy. It is deterred from passing future laws along the same lines, worried about being sued.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as companies learn from each other, and hedge funds finance suits in return for a share of the takings. The result? National sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions enacted by parliaments is that this stipulation has been written – without public consent, and often in conditions of profound opacity – inside international trade agreements.

A Real-World Instance: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to open the first major coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The Labour government then withdrew the permission the former government had issued. Today, this victory could be compromised by an secret arbitration panel reporting to only the companies petitioning it.

Last August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim against the UK government. The previous week a arbitration panel in the US capital was established to adjudicate on it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to proceed. We have no clear indication how much this sum represents. Which individual is serving as its counsel in opposition to the British government? A member of parliament, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coalmine case was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case at present, but it appears probable that he’ll use the tribunal to contest the sanctions the UK levied against him following the invasion of Ukraine. He has initiated proceedings against Luxembourg for this reason, claiming a colossal sum: an amount representing half nation's yearly budget. Included in the counsel acting for him in that case? Cherie Blair, spouse of the previous PM.

International law scholars argue that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Risks

We were assured that these events could not occur. Years ago, a senior politician, advocating for the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” An adviser on this topic accused activists of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Predictions that “once firms start to realise the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by widespread derision.

That prediction has come to pass. In the current period, oil and gas and resource corporations have filed a unprecedented number of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to halt global warming. Firms have thus far won $114bn by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP