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How do you reckon our political system works? Maybe similar to this. We elect MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. The law is upheld by the courts. End of story. However, that was how it operated in the past. Not anymore.

The Rise of Secret Tribunals

In the modern era, foreign corporations, and the wealthy individuals who own them, are able to litigate against governments for the laws they pass, at offshore tribunals made up of business advocates. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels grant no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted solely for businesses registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, running into billions.

These awards represent not tangible damages but money the tribunal officials decide the company could potentially have made. The government might be compelled to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being filed, as firms learn from each other, and hedge funds finance suits for a share of a share of the settlements. The consequence? Sovereignty and democracy are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the choices enacted by legislatures is that this stipulation has been written – without democratic mandate, and typically amid a climate of profound opacity – inside trade treaties.

A Specific Example: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the high court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine could have zero effect on national carbon targets. The Labour government subsequently revoked the permission the former government had approved. Today, this legal outcome faces being overturned by an foreign court answering to no one but the entities petitioning it.

In August, a firm whose final controllers are based in the tax haven initiated proceedings versus the UK government. Last week a dispute settlement body in Washington DC was established to adjudicate on it.

The company is seeking compensation from the UK for the money it could have earned if the mine had received permission to proceed. We have little idea how much this might be. Who is representing it in opposition to the British government? A member of parliament, and former attorney-general in the previous government, that great patriot the MP. The state enacts a policy, the national judiciary upholds it, then a international entity disputes it through an secretive arbitration panel, and a elected official acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK levied against him after the war in Ukraine. He has previously initiated proceedings against another European state for this reason, demanding $16bn: equivalent to half of nation's annual revenue. Part of the lawyers on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as guarantee for its financial support package is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, advocating for the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this topic described activists of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations grasp the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by general mockery.

That threat has now materialised. Recently, energy and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the UK mine – government attempts to stop global warming. Corporations have to date won vast sums by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP