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Can you reckon our political system functions? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills become law. Statutes are enforced by the courts. Simple as that. However, that’s how it used to work. Not anymore.

The Rise of Secret Arbitration Panels

Nowadays, international firms, along with the billionaires behind them, have the power to sue nation states for the policies they pass, at offshore tribunals staffed by business advocates. These proceedings take place in secret. Unlike our courts, these bodies 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 enterprises based in this country. The door is open only to entities registered abroad.

If a tribunal determines that a law or policy could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, potentially billions.

These sums represent not tangible damages but funds the tribunal officials decide the company might otherwise have made. The government might be compelled to rescind the measure. It will be hesitant to introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being initiated, as corporations take cues from each other, and investment funds fund legal actions for a share of a portion of the awards. The outcome? National sovereignty and popular rule are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the rulings made by parliaments is that this provision has been incorporated – without democratic mandate, and frequently under an atmosphere of total confidentiality – within bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the senior court. The judge ruled that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the consent the former government had issued. Today, this success could be compromised by an foreign court accountable to only the entities filing the suit.

Last August, a company whose ultimate owners reside in the Cayman Islands lodged a claim versus the UK government. The previous week a tribunal in the United States was established to hear it.

The company is litigating against the UK for the money it would have generated if the mine had received permission to commence operations. Citizens have no clear indication how much this sum represents. Who is representing it against the UK administration? A member of parliament, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The administration makes a decision, the domestic court validates it, then a foreign company contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Case

On the same day that the court on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case to date, but it is highly possible that he will utilise the tribunal to fight the sanctions the UK levied against him following the invasion of Ukraine. He has previously started suing another European state for this reason, demanding $16bn: an amount representing half nation's yearly budget. Included in the legal team on his side? the wife of a former prime minister, wife of the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen Russian assets as collateral for its financial support package arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Threats

The public was told that such things could not occur. Years ago, a senior politician, championing the largest and riskiest of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has not been a case in the past.” A consultant on this matter described activists of “alarmism … in reality, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “once firms begin to understand the power they now possess, they will turn their attention from the vulnerable countries to the developed economies” were greeted by scepticism.

That prediction has come to pass. In the current period, energy and extraction companies have lodged a record number of suits against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have to date won $114bn by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP