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What is your understand our political system operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Emergence of Secret Tribunals

Nowadays, overseas companies, and the wealthy individuals that control them, can sue nation states for the laws they pass, at private courts composed of corporate lawyers. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even companies based in this country. They are open only to entities operating from foreign soil.

Should an arbitration panel rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

This compensation represent not actual losses but money the arbitrators determine the company could potentially have made. The administration may have to rescind the measure. It is discouraged from enacting future policies along the same lines, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as firms observe each other, and investment funds bankroll lawsuits in exchange for a cut of the awards. The outcome? National sovereignty and democracy are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the choices made by parliaments is that this clause has been written – without democratic mandate, and often in conditions of total confidentiality – within international trade agreements.

A Concrete Example: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the High Court. The justice ruled that proposals to open the first major coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the consent the previous administration had issued. Today, this legal outcome is under threat by an secret arbitration panel accountable to only the entities filing the suit.

During August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. Last week a arbitration panel in the US capital was set up to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. The public has no idea how much this sum represents. What legal team is acting on its behalf in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the domestic court upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the tribunal on the mining lawsuit was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case so far, but it is highly possible that he’ll use the ISDS mechanism to fight the penalties the UK enacted against him after the war in Ukraine. He has previously initiated proceedings against another European state with similar intent, demanding a colossal sum: equivalent to half of state's annual revenue. Among the legal team representing him there? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

False Assurances and Mounting Costs

Politicians promised that such things were not possible. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a case in the past.” An adviser on this matter described activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries had to worry about such legal actions. Warnings that “when companies start to realise the power bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That threat has now materialised. Recently, energy and mining firms have initiated a unprecedented number of claims against nations rich and poor, opposing – as in the case of the UK mine – state efforts to prevent global warming. Companies have so far won vast sums through ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP