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How do you reckon our political system functions? Perhaps something like this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. Yet, that was how it used to work. Those days are over.

The Rise of Secret Tribunals

Nowadays, foreign corporations, and the oligarchs behind them, can sue nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are held away from public scrutiny. Unlike our courts, these bodies allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises based in this country. They are open solely for corporations registered abroad.

When a secret court finds that a government measure could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but compensation the arbitrators decide the company could potentially have made. The government might be compelled to drop the legislation. It is discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as companies take cues from each other, and investment funds finance suits in exchange for a share of the settlements. The result? Sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the choices taken by elected bodies is that this provision has been incorporated – without democratic mandate, and often in an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer found that schemes to open the first major coal mine in the UK for 30 years, in northwest England, had been wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on climate commitments. The incoming administration later cancelled the consent the previous administration had approved. Today, this legal outcome could be compromised by an offshore tribunal answering to only the companies bringing the case.

During August, a corporate entity whose final controllers are based in the Cayman Islands filed a lawsuit against the UK government. Last week a arbitration panel in Washington DC was convened to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had been allowed to commence operations. The public has no idea how much this might be. Who is acting on its behalf challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The administration makes a decision, the high court upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

The Russian Case

On the same day that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know little of the case at present, but it appears probable that he may employ the tribunal to contest the restrictions the UK levied against him after the war in Ukraine. He has already started suing Luxembourg on these grounds, claiming a colossal sum: half that government’s annual revenue. Part of the counsel on his side? Cherie Blair, spouse of the former British prime minister.

Trade specialists contend that the EU’s hesitation in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over sovereign states might be preventing the finance Ukraine critically depends on.

Misleading Claims and Mounting Threats

The public was told that these events could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An expert on this issue accused activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by such legal actions. Predictions that “when companies grasp the influence bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with widespread derision.

That threat has come to pass. Recently, energy and resource corporations have lodged a record number of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to halt climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP