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Can you understand our political system works? Maybe similar to this. We elect MPs. They vote on bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. Simple as that. Yet, that was how it once functioned. No longer.

The Advent of Secret Tribunals

Today, foreign corporations, or the wealthy individuals that control them, can sue nation states for the regulations they pass, at private courts staffed by corporate lawyers. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these bodies grant no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. They are open solely for businesses based overseas.

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

These sums represent not real financial harm but compensation the panel members conclude the company could potentially have made. The administration may have to drop the legislation. It becomes discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being brought, as firms observe each other, and private equity bankroll lawsuits in return for a portion of the settlements. The outcome? Sovereignty and democratic governance are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the rulings made by parliaments is that this provision has been inserted – without democratic mandate, and often in a climate of extreme secrecy – within bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The justice found that proposals to open the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine could have no consequence on climate commitments. The incoming administration later cancelled the permission the former government had granted. Currently, this success is under threat by an secret arbitration panel reporting to only the companies bringing the case.

Last August, a company whose beneficial owners are based in the Cayman Islands initiated proceedings against the UK government. Recently a dispute settlement body in Washington DC was established to consider the case.

This firm is litigating against the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have no idea how much this sum represents. Which individual is serving as its counsel against the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the high court supports it, then a foreign company challenges it through an secretive offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

Concurrently that the panel on the mining lawsuit was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it seems likely that he will utilise the arbitration process to fight the sanctions the UK imposed on him subsequent to the war in Ukraine. He has already started suing Luxembourg on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly income. Included in the counsel on his side? the wife of a former prime minister, married to the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen Russian assets as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over democratic administrations could be blocking the money Ukraine urgently requires.

False Assurances and Growing Risks

We were assured that these scenarios wouldn’t happen. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this matter accused critics of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies start to realise the authority they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction is now a reality. In the current period, fossil fuel and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – official measures to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP