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Can you understand our political system works? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. That's it. Well, that’s how it once functioned. No longer.

The Rise of Secret Arbitration Panels

Today, international firms, along with the wealthy individuals that control them, have the power to sue governments for the laws they pass, at private courts staffed by corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these bodies allow no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses based in this country. The door is open solely for entities registered abroad.

If a tribunal determines that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

These sums constitute not real financial harm but money the tribunal officials decide the company could potentially have made. The state could be forced to abandon its policy. It is discouraged from enacting future policies along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being brought, as companies observe each other, and hedge funds fund legal actions for a share of a portion of the awards. The consequence? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the choices enacted by legislatures is that this clause has been inserted – absent public approval, and often in conditions of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The Whitehaven Coal Mine

A year ago, activists won a great victory at the senior court. The justice found that schemes to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration subsequently revoked the licence the Tories had approved. Today, this success faces being overturned by an offshore tribunal answering to exclusively the companies filing the suit.

In August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was established to consider the case.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had received permission to commence operations. The public has no idea how much this might be. Which individual is representing it in opposition to the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a overseas corporation challenges it through an undemocratic private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the penalties the UK enacted against him subsequent to the war in Ukraine. He has previously started suing a small nation for this reason, claiming a colossal sum: equivalent to half of state's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s delay in using frozen state funds as collateral for its financial support package arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the funds Ukraine critically depends on.

False Assurances and Growing Risks

The public was told that these scenarios could not occur. Years ago, a senior politician, advocating for the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An adviser on this issue described campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with scepticism.

That prediction is now a reality. In the current period, energy and resource corporations have initiated a unprecedented number of suits against nations across the economic spectrum, opposing – as in the case of the UK mine – government attempts to halt climate breakdown. Companies have to date won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP