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How do you understand our political system operates? It could be something like this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Well, that used to be how it operated in the past. No longer.

The Rise of Secret Tribunals

Today, foreign corporations, along with the oligarchs behind them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by business advocates. These proceedings take place in secret. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses operating from this country. The door is open only to entities based overseas.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions, running into billions.

These awards represent not real financial harm but funds the panel members conclude the company could potentially have made. The government may have to drop the legislation. It becomes deterred from passing future laws along the same lines, worried about being sued.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as corporations learn from each other, and hedge funds finance suits for a share of a portion of the takings. The consequence? National sovereignty and democratic governance are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the rulings taken by legislatures is that this clause has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – within trade treaties.

A Real-World Case: The UK Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The presiding officer found that proposals to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine would have had no impact on climate commitments. The Labour government then withdrew the licence the former government had issued. Now, this victory faces being overturned by an foreign court accountable to only the corporations filing the suit.

Last August, a corporate entity whose final controllers reside in the offshore financial centre initiated proceedings versus the UK government. The previous week a arbitration panel in the United States was convened to hear it.

The company is suing the UK for the revenue it might have made if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. What legal team is acting on its behalf against the state? A member of parliament, and ex-law officer in the outgoing administration, that great patriot the MP. The government enacts a policy, the national judiciary supports it, then a international entity disputes it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case to date, but it seems likely that he will utilise the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has filed a claim against a small nation on these grounds, seeking sixteen billion dollars: an amount representing half state's yearly income. Part of the legal team acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Legal experts argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that these scenarios wouldn’t happen. Years ago, a government leader, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and there has not been a case in the past.” A consultant on this matter accused critics of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “once firms start to realise the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by widespread derision.

That threat is now a reality. This year, fossil fuel and extraction companies have lodged a record number of claims against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – government attempts to halt global warming. Corporations have to date won vast sums through ISDS, of which oil majors have secured the majority. That represents the combined GDP