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Can you understand our political system works? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. End of story. Well, that’s how it used to work. Those days are over.

The Rise of Secret Tribunals

Nowadays, overseas companies, and the billionaires behind them, can sue nation states for the laws they pass, at secret arbitration panels made up of corporate lawyers. Such disputes are held behind closed doors. Unlike our courts, these bodies allow no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including businesses operating from this country. They are open only to corporations operating from foreign soil.

If a tribunal determines that a legislative action may compromise the corporation’s projected profits, it may order compensation of vast sums, running into billions.

These sums are based not on actual losses but funds the tribunal officials conclude the company could potentially have made. The government could be forced to abandon its policy. It becomes hesitant to introducing similar legislation of a similar nature, for fear of being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as companies learn from each other, and hedge funds fund legal actions in return for a share of the takings. The consequence? National sovereignty and democratic governance are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the decisions taken by parliaments is that this stipulation has been incorporated – without democratic mandate, and frequently under conditions of total confidentiality – into trade treaties.

A Concrete Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The justice ruled that plans to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The incoming administration later cancelled the permission the previous administration had approved. Today, this victory is under threat by an secret arbitration panel answering to exclusively the companies petitioning it.

Last August, a company whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. The previous week a dispute settlement body in Washington DC was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been allowed to proceed. The public has no idea how much this could amount to. Who is acting on its behalf against the UK administration? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot the MP. The state enacts a policy, the domestic court upholds it, then a international entity challenges it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK enacted against him after the war in Ukraine. He has already initiated proceedings against a small nation for this reason, seeking $16bn: an amount representing half state's yearly budget. Part of the legal team acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

International law scholars contend that the EU’s hesitation in using frozen state funds as security for its financial support package is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Threats

We were assured that such things were not possible. In 2014, a government leader, championing the largest and riskiest of all these agreements, told us: “We’ve signed trade deal after trade deal and there has never been a case in the past.” A consultant on this issue described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “as corporations grasp the authority they now possess, they will shift their focus from the weak nations to the wealthy nations” were greeted by general mockery.

That prediction is now a reality. This year, energy and mining firms have filed a unprecedented number of cases against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to halt global warming. Companies have to date won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP