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What is your understand our system of government functions? Maybe something like this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation are enforced by the courts. End of story. However, that was how it used to work. Those days are over.

The Rise of Shadow Tribunals

Nowadays, overseas companies, along with the wealthy individuals behind them, are able to litigate against governments for the regulations they pass, at secret arbitration panels composed of commercial attorneys. These proceedings take place behind closed doors. In contrast to domestic courts, these panels allow no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, or even companies headquartered in this country. The door is open solely for entities registered abroad.

If a tribunal rules that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums represent not real financial harm but money the panel members determine the company would perhaps have made. The government may have to rescind the measure. It will be discouraged from enacting future policies in that area, worried about being sued.

A System Running Rampant

Record numbers of cases are being brought, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a share of the takings. The result? Sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices enacted by elected bodies is that this stipulation has been written – without public consent, and typically amid conditions of extreme secrecy – into international trade agreements.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The judge found that schemes to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine could have zero effect on climate commitments. The new government then withdrew the consent the Tories had issued. Today, this legal outcome is under threat by an foreign court accountable to no one but the entities bringing the case.

Last August, a firm whose final controllers are based in the Cayman Islands initiated proceedings against the UK government. Last week a dispute settlement body in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had received permission to go ahead. Citizens have little idea how much this sum represents. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the previous government, that great patriot the MP. The state makes a decision, the domestic court upholds it, then a overseas corporation contests it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coalmine case was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case so far, but it is highly possible that he may employ the ISDS mechanism to fight the penalties the UK levied against him after the invasion of Ukraine. He has filed a claim against a small nation on these grounds, seeking $16bn: equivalent to half of state's annual revenue. Among the legal team on his side? a prominent lawyer, wife of the previous PM.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over sovereign states could be blocking the finance Ukraine critically depends on.

Empty Promises and Mounting Costs

The public was told that these scenarios were not possible. Years ago, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this matter accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear ISDS claims. Warnings that “once firms begin to understand the power they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were met with widespread derision.

That warning is now a reality. Recently, oil and gas and mining firms have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Firms have to date won $114bn by using ISDS, of which oil majors have secured $84bn. That represents the combined GDP