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What is your understand our system of government works? Perhaps something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Advent of Secret Tribunals

Today, foreign corporations, or the oligarchs behind them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these panels allow no right of appeal or judicial review. You or I cannot take a case to them, nor can our government, or even enterprises headquartered in this country. The door is open only to businesses operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s projected profits, it can award financial penalties of vast sums, even billions.

These sums constitute not real financial harm but money the panel members decide the company might otherwise have made. The state may have to abandon its policy. It will be discouraged from enacting future policies in that area, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of disputes are being brought, as firms learn from each other, and hedge funds bankroll lawsuits in exchange for a cut of the awards. The outcome? National sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the decisions made by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under conditions of total confidentiality – into international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The justice ruled that proposals to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the consent the former government had issued. Today, this legal outcome is under threat by an offshore tribunal reporting to exclusively the entities petitioning it.

Last August, a company whose beneficial owners are based in the tax haven initiated proceedings challenging the UK government. The previous week a dispute settlement body in the US capital was set up to consider the case.

This firm is litigating against the UK for the money it could have earned if the mine had received permission to commence operations. We have no clear indication how much this sum represents. Who is serving as its counsel in opposition to the UK administration? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a overseas corporation disputes it through an secretive private court, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the panel on the mining lawsuit was established, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the sanctions the UK enacted against him following the war in Ukraine. He has already filed a claim against Luxembourg on these grounds, claiming a colossal sum: equivalent to half of government’s annual revenue. Among the legal team representing him there? a prominent lawyer, spouse of the former British prime minister.

Legal experts argue that the EU’s procrastination in using frozen oligarchs' funds as collateral for its financial support package is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over elected governments might be preventing the money Ukraine critically depends on.

Misleading Claims and Growing Risks

The public was told that these scenarios wouldn’t happen. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this matter described campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “when companies start to realise the power they now possess, they will turn their attention from the weak nations to the developed economies” were met with scepticism.

That warning is now a reality. Recently, energy and extraction companies have filed a historic level of suits against nations rich and poor, opposing – as in the case of the UK mine – official measures to prevent climate breakdown. Corporations have thus far won $114bn via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP