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Can you perceive our system of government operates? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills become law. Legislation is upheld by the courts. That's it. Well, that was how it used to work. Not anymore.

The Rise of Secret Tribunals

Nowadays, foreign corporations, along with the oligarchs who own them, can sue nation states for the laws they pass, at offshore tribunals staffed by corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these tribunals allow no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, or even businesses operating from this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards constitute not real financial harm but compensation the tribunal officials conclude the company might otherwise have made. The administration could be forced to abandon its policy. It becomes hesitant to enacting future policies in that area, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being brought, as corporations observe each other, and investment funds bankroll lawsuits in return for a portion of the settlements. The outcome? Sovereignty and popular rule are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the choices enacted by legislatures is that this provision has been incorporated – without public consent, and frequently under conditions of extreme secrecy – into trade treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the senior court. The justice determined that plans to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no consequence on national carbon targets. The Labour government later cancelled the consent the Tories had approved. Today, this legal outcome faces being overturned by an offshore tribunal answering to only the corporations bringing the case.

During August, a corporate entity whose beneficial owners reside in the Cayman Islands lodged a claim versus the UK government. Last week a arbitration panel in the United States was convened to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. We have no idea how much this could amount to. What legal team is acting on its behalf challenging the state? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a overseas corporation contests it through an secretive private court, and a member of our parliament represents its behalf.

A Sanctions Challenge

On the same day that the panel on the coalmine case was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case to date, but it appears probable that he will utilise the tribunal to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against another European state on these grounds, seeking $16bn: half that nation's yearly income. Among the legal team representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars argue that the EU’s hesitation in using frozen Russian assets as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over sovereign states might be preventing the finance Ukraine critically depends on.

Empty Promises and Escalating Threats

We were assured that these events could not occur. Years ago, a former prime minister, championing the largest and riskiest of all investment pacts, declared: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this topic labelled activists of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “as corporations begin to understand the influence they’ve been granted, they will turn their attention from the poorer states to the strong ones” were dismissed with scepticism.

That prediction has come to pass. In the current period, energy and mining firms have initiated a historic level of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Companies have thus far won vast sums through ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP