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Can you understand our political system works? It could be something like this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that’s how it used to work. No longer.

The Advent of Secret Tribunals

Today, international firms, and the wealthy individuals behind them, have the power to sue governments for the laws they pass, at private courts made up of commercial attorneys. The cases are held in secret. In contrast to domestic courts, these panels grant no right of appeal or oversight by judges. The general public cannot take a case to them, and neither can our government, or even companies operating from this country. The door is open only to businesses operating from foreign soil.

If a tribunal determines that a legislative action might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards constitute not real financial harm but money the tribunal officials determine the company might otherwise have made. The government may have to drop the legislation. It is hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of legal actions are being filed, as corporations take cues from each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the choices taken by parliaments is that this provision has been inserted – without public consent, and typically amid conditions of extreme secrecy – within international trade agreements.

A Specific Example: The Whitehaven Coal Mine

Last year, activists secured a significant win at the High Court. The justice ruled that schemes to excavate the first major coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The new government later cancelled the licence the former government had approved. Today, this victory faces being overturned by an offshore tribunal answering to no one but the companies petitioning it.

In August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit versus the UK government. Last week a dispute settlement body in the United States was established to adjudicate on it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. We have no idea how much this might be. Who is acting on its behalf in opposition to the British government? An elected representative, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a foreign company contests it through an secretive offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case to date, but it seems likely that he’ll use the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously started suing another European state with similar intent, claiming $16bn: equivalent to half of nation's yearly budget. Part of the counsel on his side? a prominent lawyer, wife of the former British prime minister.

Trade specialists believe that the EU’s procrastination in leveraging immobilised state funds as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that such things could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this matter labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear such legal actions. Warnings that “when companies grasp the influence they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction is now a reality. Recently, oil and gas and resource corporations have filed a unprecedented number of suits against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – official measures to stop climate breakdown. Firms have to date won vast sums via ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP