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How do you understand our political system works? It could be something like this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that used to be how it used to work. Those days are over.

The Rise of Secret Tribunals

Nowadays, foreign corporations, and the oligarchs behind them, can sue nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases are held in secret. In contrast to domestic courts, these bodies grant no avenue for appeal or legal review. The general public are unable to file a case to them, just as our government, including companies headquartered in this country. They are open only to entities registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

This compensation constitute not real financial harm but money the arbitrators decide the company might otherwise have made. The administration could be forced to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as corporations learn from each other, and investment funds bankroll lawsuits in return for a share of the settlements. The result? Sovereignty and popular rule are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the decisions made by parliaments is that this clause has been incorporated – without democratic mandate, and often in an atmosphere of total confidentiality – inside bilateral investment treaties.

A Concrete Example: The UK Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The judge ruled that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the licence the Tories had granted. Today, this success could be compromised by an offshore tribunal accountable to no one but the companies filing the suit.

In August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the US capital was set up to adjudicate on it.

This firm is seeking compensation from the UK for the revenue it might have made if the mine had received permission to proceed. We have no idea how much this could amount to. Which individual is serving as its counsel against the UK administration? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company contests it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

A Sanctions Case

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case so far, but it seems likely that he may employ the ISDS mechanism to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has already initiated proceedings against another European state with similar intent, seeking sixteen billion dollars: half that state's annual revenue. Among the lawyers on his side? the wife of a former prime minister, spouse of the previous PM.

Trade specialists believe that the EU’s delay in using frozen Russian assets as security for its aid for Ukraine is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states might be preventing the funds Ukraine desperately needs.

Misleading Claims and Escalating Threats

We were assured that these scenarios could not occur. In 2014, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this issue described critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “once firms start to realise the authority they now possess, they will shift their focus from the poorer states to the wealthy nations” were dismissed with widespread derision.

That prediction is now a reality. Recently, oil and gas and resource corporations have lodged a unprecedented number of suits against nations rich and poor, challenging – similar to the UK mine – state efforts to prevent climate breakdown. Companies have to date won $114bn via ISDS, of which oil majors have secured $84bn. That represents the combined GDP