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Can you understand our political system operates? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. The law are enforced by the courts. End of story. However, that was how it used to work. No longer.

The Advent of Secret Tribunals

In the modern era, foreign corporations, or the wealthy individuals behind them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals made up of business advocates. The cases are held behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including enterprises headquartered in this country. The door is open only to corporations registered abroad.

If a tribunal determines that a law or policy could harm the corporation’s projected profits, it can award damages of hundreds of millions, even billions.

This compensation constitute not tangible damages but funds the panel members conclude the company might otherwise have made. The administration might be compelled to drop the legislation. It will be hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of legal actions are being initiated, as firms take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the takings. The outcome? Sovereignty and democratic governance are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the decisions taken by legislatures is that this stipulation has been written – without public consent, and typically amid an atmosphere of total confidentiality – within bilateral investment treaties.

A Concrete Example: The UK Coalmine

Twelve months ago, activists secured a significant win at the senior court. The presiding officer determined that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the licence the former government had issued. Currently, this legal outcome could be compromised by an secret arbitration panel answering to no one but the companies filing the suit.

Last August, a firm whose beneficial owners are located in the tax haven filed a lawsuit versus the UK government. Last week a arbitration panel in the US capital was convened to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have no clear indication how much this might be. Who is acting on its behalf against the British government? A member of parliament, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity challenges it through an undemocratic private court, and a sitting MP acts on its behalf.

A Sanctions Case

On the same day that the tribunal on the coal mine dispute was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it is highly possible that he will utilise the ISDS mechanism to fight the penalties the UK enacted against him following the invasion of Ukraine. He has previously started suing a small nation for this reason, claiming sixteen billion dollars: an amount representing half government’s yearly income. Among the counsel on his side? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Mounting Costs

Politicians promised that these scenarios were not possible. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” An adviser on this topic described critics of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. Recently, fossil fuel and extraction companies have initiated a unprecedented number of claims against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – government attempts to stop climate breakdown. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP