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Can you perceive our system of government operates? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is secured, the bills become law. The law are enforced by the courts. That's it. However, that was how it operated in the past. Not anymore.

The Emergence of Secret Tribunals

In the modern era, overseas companies, and the wealthy individuals behind them, can sue nation states for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held in secret. In contrast to domestic courts, these bodies allow no right of appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even enterprises operating from this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s projected profits, it can award financial penalties of vast sums, even billions.

This compensation are based not on actual losses but funds the arbitrators determine the company would perhaps have made. The state could be forced to abandon its policy. It becomes hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being filed, as companies learn from each other, and investment funds fund legal actions in return for a portion of the settlements. The consequence? Democratic sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions enacted by legislatures is that this provision has been written – absent public approval, and often in a climate of extreme secrecy – inside bilateral investment treaties.

A Real-World Example: The UK Coalmine

Last year, a conservation group secured a significant win at the high court. The judge determined that schemes to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have had no impact on national carbon targets. The incoming administration then withdrew the consent the Tories had granted. Currently, this victory could be compromised by an secret arbitration panel accountable to no one but the corporations petitioning it.

Last August, a firm whose beneficial owners are located in the tax haven filed a lawsuit against the UK government. Last week a tribunal in Washington DC was convened to consider the case.

The company is suing the UK for the revenue it might have made if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. What legal team is acting on its behalf against the UK administration? A sitting MP, and ex-law officer in the previous government, that great patriot the MP. The government makes a decision, the national judiciary validates it, then a foreign company contests it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case to date, but it appears probable that he will utilise the tribunal to contest the sanctions the UK enacted against him after the war in Ukraine. He has already started suing another European state on these grounds, seeking sixteen billion dollars: equivalent to half of government’s yearly budget. Among the lawyers on his side? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s hesitation in leveraging immobilised Russian assets as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the finance Ukraine critically depends on.

False Assurances and Escalating Risks

The public was told that these events wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, stated: “The UK has signed trade agreement upon trade deal and there has never been a case in the past.” A consultant on this issue accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about ISDS claims. Predictions that “once firms grasp the authority bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. This year, oil and gas and extraction companies have filed a unprecedented number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have thus far won vast sums through ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP