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What is your reckon our system of government works? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. The law is upheld by the courts. End of story. Well, that’s how it used to work. Those days are over.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, and the billionaires that control them, can sue governments for the laws they pass, at private courts staffed by business advocates. These proceedings take place in secret. In contrast to domestic courts, these tribunals allow no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, or even companies based in this country. They are open exclusively to businesses registered abroad.

If a tribunal determines that a legislative action might diminish the corporation’s expected profits, it can award damages of vast sums, potentially billions.

These sums represent not tangible damages but funds the tribunal officials conclude the company would perhaps have made. The government could be forced to drop the legislation. It is hesitant to enacting future policies along the same lines, for fear of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as corporations learn from each other, and private equity bankroll lawsuits for a share of a share of the settlements. The outcome? Sovereignty and popular rule are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the choices enacted by parliaments is that this stipulation has been written – absent public approval, and often in an atmosphere of profound opacity – within trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the high court. The presiding officer determined that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have no consequence on our carbon budgets. The Labour government subsequently revoked the licence the Tories had granted. Currently, this victory is under threat by an secret arbitration panel reporting to exclusively the corporations filing the suit.

In August, a corporate entity whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a arbitration panel in the US capital was convened to adjudicate on it.

The company is suing the UK for the money it might have made if the mine had been permitted to commence operations. The public has no clear indication how much this could amount to. Which individual is representing it in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The government makes a decision, the high court supports it, then a foreign company contests it through an secretive private court, and a sitting MP represents its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to fight the restrictions the UK levied against him following the war in Ukraine. He has already filed a claim against Luxembourg with similar intent, seeking a colossal sum: an amount representing half state's yearly income. Part of the counsel on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Costs

We were assured that these scenarios could not occur. Years ago, a government leader, championing the most significant and hazardous of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” A consultant on this topic described activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “when companies begin to understand the power they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with widespread derision.

That warning has now materialised. In the current period, fossil fuel and mining firms have initiated a historic level of suits against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to halt global warming. Corporations have so far won vast sums via ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP