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How do you reckon our system of government works? Maybe similar to this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is upheld by the courts. That's it. However, that was how it operated in the past. No longer.

The Emergence of Shadow Tribunals

In the modern era, international firms, or the billionaires behind them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. The general public are unable to file a case to them, nor can our government, or even companies based in this country. Access is granted only to businesses operating from foreign soil.

When a secret court rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant damages of vast sums, potentially billions.

This compensation represent not actual losses but funds the arbitrators decide the company would perhaps have made. The state may have to abandon its policy. It is hesitant to enacting future policies along the same lines, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of cases are being filed, as companies learn from each other, and hedge funds finance suits for a share of a portion of the takings. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the rulings taken by parliaments is that this clause has been written – without public consent, and typically amid conditions of profound opacity – within international trade agreements.

A Real-World Instance: The Cumbrian Coalmine

Twelve months ago, activists won a great victory at the High Court. The judge found that proposals to open the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The incoming administration subsequently revoked the permission the Tories had approved. Today, this legal outcome could be compromised by an foreign court accountable to only the entities petitioning it.

In August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit 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 money it would have generated if the mine had received permission to proceed. Citizens have no clear indication how much this might be. Which individual is representing it in opposition to the state? An elected representative, and ex-law officer in the previous government, that great patriot the MP. The government passes a law, the high court validates it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it seems likely that he may employ the tribunal to contest the sanctions the UK imposed on him following the Russian aggression. He has previously initiated proceedings against another European state with similar intent, demanding a colossal sum: equivalent to half of government’s yearly budget. Among the counsel acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Legal experts argue that the EU’s hesitation in using frozen Russian assets as guarantee for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

The public was told that these scenarios were not possible. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “The UK has signed trade deal after trade deal and there has never been a case in the past.” An adviser on this issue described critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were met with general mockery.

That warning has come to pass. This year, fossil fuel and extraction companies have filed a unprecedented number of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – government attempts to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP