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Can you understand our political system works? Maybe something like this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that used to be how it used to work. Those days are over.

The Advent of Secret Tribunals

Today, international firms, and the oligarchs who own them, have the power to sue elected administrations for the policies they pass, at private courts made up of corporate lawyers. The cases are held behind closed doors. Unlike our courts, these tribunals provide no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, or even businesses operating from this country. The door is open solely for entities registered abroad.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, even billions.

These sums represent not real financial harm but money the tribunal officials determine the company would perhaps have made. The state could be forced to abandon its policy. It is deterred from introducing similar legislation in that area, worried about incurring a lawsuit.

A System Running Rampant

Unprecedented levels of disputes are being brought, as corporations learn from each other, and private equity finance suits in exchange for a share of the settlements. The consequence? Sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the choices taken by parliaments is that this clause has been written – absent public approval, and often in a climate of total confidentiality – inside trade treaties.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The judge ruled that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have had no consequence on our carbon budgets. The incoming administration subsequently revoked the consent the former government had granted. Now, this success faces being overturned by an foreign court reporting to no one but the companies bringing the case.

During August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim against the UK government. The previous week a dispute settlement body in Washington DC was established to consider the case.

This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. The public has little idea how much this could amount to. Which individual is acting on its behalf against the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The government enacts a policy, the high court validates it, then a international entity contests it through an undemocratic private court, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the mining lawsuit was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case at present, but it appears probable that he’ll use the arbitration process to fight the sanctions the UK enacted against him subsequent to the war in Ukraine. He has filed a claim against Luxembourg with similar intent, seeking a colossal sum: an amount representing half state's yearly budget. Among the counsel on his side? Cherie Blair, spouse of the ex-UK leader.

International law scholars believe that the EU’s hesitation in leveraging immobilised state funds as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations may be obstructing the money Ukraine critically depends on.

Empty Promises and Growing Threats

The public was told that such things wouldn’t happen. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this matter labelled activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations needed to fear such legal actions. Warnings that “as corporations grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with scepticism.

That threat is now a reality. In the current period, energy and extraction companies have initiated a record number of claims against nations rich and poor, contesting – similar to the UK mine – state efforts to stop climate breakdown. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP