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How do you understand our system of government operates? Maybe something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills become law. Statutes is upheld by the courts. End of story. However, that’s how it once functioned. No longer.

The Rise of Shadow Arbitration Panels

In the modern era, overseas companies, or the billionaires behind them, are able to litigate against governments for the laws they pass, at private courts staffed by commercial attorneys. The cases are conducted in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel finds that a legislative action might diminish the corporation’s projected profits, it may order compensation of hundreds of millions, potentially billions.

This compensation constitute not actual losses but compensation the panel members conclude the company might otherwise have made. The administration might be compelled to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Running Rampant

Historically high figures of legal actions are being brought, as firms take cues from each other, and hedge funds bankroll lawsuits for a share of a cut of the takings. The consequence? National sovereignty and popular rule are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings taken by parliaments is that this provision has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – inside trade treaties.

A Real-World Case: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer found that proposals to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on our carbon budgets. The new government later cancelled the licence the former government had granted. Today, this legal outcome is under threat by an offshore tribunal answering to exclusively the entities bringing the case.

In August, a company whose final controllers are based in the Cayman Islands initiated proceedings versus the UK government. Recently a tribunal in the US capital was convened to hear it.

The company is seeking compensation from the UK for the money it could have earned if the mine had been allowed to proceed. We have no idea how much this might be. Which individual is serving as its counsel in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a overseas corporation challenges it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case so far, but it seems likely that he may employ the tribunal to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has already filed a claim against Luxembourg on these grounds, seeking $16bn: half that nation's annual revenue. Included in the legal team on his side? Cherie Blair, married to the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over elected governments might be preventing the funds Ukraine urgently requires.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. Previously, a senior politician, championing the biggest and most dangerous of all investment pacts, told us: “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 “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “once firms start to realise the power they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by widespread derision.

That prediction has come to pass. This year, energy and extraction companies have initiated a historic level of claims against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have to date won vast sums by using ISDS, of which energy giants have secured the majority. That equates to the combined GDP