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What is your reckon our political system works? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Rise of Secret Tribunals

In the modern era, foreign corporations, or the wealthy individuals who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals provide no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises operating from this country. The door is open only to businesses based overseas.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These awards are based not on actual losses but funds the panel members conclude the company could potentially have made. The government could be forced to rescind the measure. It becomes hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being brought, as corporations learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the settlements. The result? Sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the rulings taken by legislatures is that this clause has been inserted – without democratic mandate, and frequently under conditions of extreme secrecy – inside trade treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for 30 years, in northwest England, had been wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no impact on climate commitments. The Labour government subsequently revoked the consent the former government had approved. Today, this legal outcome is under threat by an secret arbitration panel reporting to no one but the companies bringing the case.

Last August, a firm whose ultimate owners reside in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was set up to hear it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had been allowed to proceed. Citizens have no idea how much this could amount to. What legal team is acting on its behalf against the state? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case so far, but it appears probable that he may employ the tribunal to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has previously started suing another European state for this reason, demanding sixteen billion dollars: equivalent to half of state's yearly budget. Part of the counsel representing him there? Cherie Blair, wife of the former British prime minister.

International law scholars argue that the EU’s delay in using frozen Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over sovereign states might be preventing the finance Ukraine critically depends on.

Empty Promises and Mounting Risks

Politicians promised that such things were not possible. Years ago, a government leader, advocating for the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade agreement upon trade deal and there has not been a problem in the past.” A consultant on this matter described campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries needed to fear such legal actions. Predictions that “when companies start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That threat is now a reality. This year, energy and resource corporations have initiated a record number of claims against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – government attempts to halt global warming. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP