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What is your perceive our system of government works? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Emergence of Secret Tribunals

Nowadays, international firms, and the billionaires who own them, can sue nation states for the policies they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies grant no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted solely for businesses based overseas.

If a tribunal determines that a government measure might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, potentially billions.

These sums constitute not tangible damages but money the tribunal officials determine the company could potentially have made. The government may have to rescind the measure. It is discouraged from enacting future policies in that area, for fear of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being brought, as companies take cues from each other, and hedge funds fund legal actions in exchange for a cut of the settlements. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the decisions made by parliaments is that this provision has been inserted – without public consent, and typically amid an atmosphere of extreme secrecy – within bilateral investment treaties.

A Concrete Case: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The judge found that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the permission the former government had issued. Today, this legal outcome faces being overturned by an foreign court accountable to no one but the corporations bringing the case.

In August, a corporate entity whose ultimate owners are based in the Cayman Islands lodged a claim versus the UK government. The previous week a arbitration panel in the United States was established to consider the case.

The claimant is litigating against the UK for the money it could have earned if the mine had received permission to commence operations. The public has no clear indication how much this might be. Which individual is representing it against the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the high court upholds it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

The Russian Case

Simultaneously that the panel on the coalmine case was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case so far, but it seems likely that he may employ the arbitration process to fight the sanctions the UK levied against him after the invasion of Ukraine. He has filed a claim against a small nation for this reason, claiming sixteen billion dollars: half that government’s yearly budget. Part of the lawyers on his side? Cherie Blair, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

Empty Promises and Growing Costs

Politicians promised that such things could not occur. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, declared: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this topic described campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear these lawsuits. Predictions that “once firms start to realise the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were greeted by widespread derision.

That warning has come to pass. Recently, oil and gas and extraction companies have initiated a record number of cases against nations across the economic spectrum, opposing – similar to the Whitehaven project – government attempts to halt environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP