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Can you perceive our system of government works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. Simple as that. Yet, that’s how it once functioned. Not anymore.

The Advent of Shadow Tribunals

Today, overseas companies, or the oligarchs who own them, can sue governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals allow no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies headquartered in this country. They are open exclusively to corporations based overseas.

Should an arbitration panel finds that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These awards are based not on real financial harm but money the tribunal officials conclude the company could potentially have made. The government may have to drop the legislation. It will be hesitant to introducing similar legislation of a similar nature, for fear of being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as companies take cues from each other, and private equity bankroll lawsuits in return for a portion of the awards. The consequence? Democratic sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the rulings made by elected bodies is that this provision has been written – absent public approval, and typically amid conditions of extreme secrecy – into trade treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The justice ruled that plans to dig the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine could have no consequence on our carbon budgets. The new government later cancelled the consent the previous administration had approved. Now, this legal outcome is under threat by an foreign court reporting to exclusively the companies filing the suit.

Last August, a firm whose beneficial owners are located in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in the United States was established to adjudicate on it.

The claimant is suing the UK for the revenue it might have made if the mine had received permission to go ahead. The public has little idea how much this could amount to. Which individual is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The administration enacts a policy, the domestic court upholds it, then a foreign company disputes it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the coalmine case was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case so far, but it seems likely that he’ll use the arbitration process to contest the penalties the UK imposed on him following the Russian aggression. He has already started suing Luxembourg with similar intent, seeking a colossal sum: half that nation's annual revenue. Included in the legal team acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s hesitation in using frozen state funds as collateral for its financial support package stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Threats

Politicians promised that these events were not possible. Previously, a former prime minister, championing the most significant and hazardous of all such treaties, told us: “We’ve signed trade deal after trade deal and there has never been a case in the past.” A consultant on this matter labelled activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “as corporations begin to understand the influence they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. In the current period, oil and gas and extraction companies have filed a record number of suits against nations rich and poor, opposing – like the example of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Firms have thus far won $114bn by using ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP