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How do you reckon our political system works? It could be something like this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. End of story. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, overseas companies, along with the billionaires that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of commercial attorneys. These proceedings take place away from public scrutiny. In contrast to domestic courts, these bodies provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. The door is open exclusively to entities based overseas.

Should an arbitration panel determines that a government measure may compromise the corporation’s projected profits, it has the power to grant financial penalties of vast sums, running into billions.

This compensation represent not tangible damages but compensation the panel members decide the company would perhaps have made. The administration may have to abandon its policy. It is hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of cases are being filed, as corporations observe each other, and private equity finance suits in return for a cut of the awards. The consequence? National sovereignty and democracy are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the rulings made by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under conditions of total confidentiality – within trade treaties.

A Real-World Case: The UK Coal Mine

A year ago, activists secured a significant win at the senior court. The presiding officer determined that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have no consequence on national carbon targets. The new government later cancelled the licence the previous administration had approved. Today, this success faces being overturned by an offshore tribunal accountable to exclusively the corporations bringing the case.

During August, a corporate entity whose beneficial owners are located in the tax haven lodged a claim against the UK government. Recently a dispute settlement body in the United States was set up to hear it.

This firm is litigating against the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company challenges it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Case

Concurrently that the tribunal on the coalmine case was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the sanctions the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against a small nation on these grounds, seeking a colossal sum: half that nation's yearly budget. Part of the lawyers representing him there? Cherie Blair, married to the ex-UK leader.

International law scholars contend that the EU’s delay in leveraging immobilised oligarchs' funds as security for its financial support package stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over elected governments could be blocking the funds Ukraine urgently requires.

False Assurances and Escalating Threats

Politicians promised that these events could not occur. In 2014, a former prime minister, promoting the largest and riskiest of all investment pacts, told us: “We’ve signed trade agreement upon trade deal and there has not been a issue in the past.” A consultant on this topic labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “when companies begin to understand the power they now possess, they will shift their focus from the poorer states to the strong ones” were met with general mockery.

That warning has come to pass. In the current period, fossil fuel and mining firms have lodged a unprecedented number of suits against nations both wealthy and developing, challenging – similar to the UK mine – state efforts to stop environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP