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Can you perceive our political system works? Perhaps something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Advent of Secret Tribunals

Today, foreign corporations, along with the oligarchs who own them, can sue nation states for the policies they pass, at offshore tribunals made up of business advocates. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals grant no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, including businesses based in this country. Access is granted solely for corporations operating from foreign soil.

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

These sums constitute not tangible damages but funds the tribunal officials decide the company could potentially have made. The state could be forced to abandon its policy. It is hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being filed, as corporations take cues from each other, and hedge funds fund legal actions for a share of a share of the awards. The result? Democratic sovereignty and democracy are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the choices taken by parliaments is that this stipulation has been written – absent public approval, and typically amid an atmosphere of total confidentiality – within bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the High Court. The justice ruled that plans to dig the first deep coalmine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had no impact on climate commitments. The new government then withdrew the consent the former government had approved. Today, this victory could be compromised by an secret arbitration panel answering to no one but the companies filing the suit.

During August, a company whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was established to hear it.

The company is suing the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this sum represents. Who is serving as its counsel in opposition to the state? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a international entity contests it through an undemocratic private court, and a sitting MP works for its behalf.

An Oligarch's Case

Concurrently that the panel on the coalmine case was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case so far, but it is highly possible that he’ll use the arbitration process to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has started suing another European state on these grounds, claiming $16bn: half that state's annual revenue. Included in the lawyers on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Threats

We were assured that these scenarios wouldn’t happen. Previously, a former prime minister, championing the most significant and hazardous of all these agreements, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this issue labelled campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about these lawsuits. Warnings that “when companies start to realise the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were met with general mockery.

That warning is now a reality. In the current period, fossil fuel and resource corporations have initiated a historic level of claims against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to halt environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP