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How do you understand our system of government works? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. However, that’s how it used to work. No longer.

The Advent of Shadow Tribunals

In the modern era, foreign corporations, along with the wealthy individuals behind them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of commercial attorneys. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises operating from this country. They are open solely for businesses based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it can award financial penalties of hundreds of millions, even billions.

These sums represent not tangible damages but money the tribunal officials conclude the company would perhaps have made. The administration might be compelled to rescind the measure. It is deterred from enacting future policies of a similar nature, worried about facing litigation.

A Process Running Rampant

Historically high figures of legal actions are being initiated, as companies take cues from each other, and investment funds finance suits for a share of a cut of the takings. The consequence? Democratic sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the choices made by legislatures is that this stipulation has been incorporated – without public consent, and typically amid conditions of extreme secrecy – into trade treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The justice found that proposals to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The incoming administration later cancelled the permission the Tories had approved. Currently, this legal outcome faces being overturned by an secret arbitration panel reporting to exclusively the corporations filing the suit.

During August, a company whose final controllers reside in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the US capital was established to hear it.

This firm is suing the UK for the profits it could have earned if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. Who is serving as its counsel challenging the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The government enacts a policy, the high court validates it, then a foreign company challenges it through an secretive arbitration panel, and a elected official represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case so far, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK enacted against him following the Russian aggression. He has previously filed a claim against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Part of the counsel acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that such things wouldn’t happen. Previously, a government leader, promoting the largest and riskiest of all such treaties, declared: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” A consultant on this matter accused campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear such legal actions. Predictions that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction has now materialised. This year, energy and extraction companies have initiated a record number of cases against nations rich and poor, challenging – like the example of the UK mine – official measures to stop global warming. Firms have thus far won $114bn through ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP