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Can you perceive our system of government works? It could be similar to this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. However, that was how it operated in the past. No longer.

The Emergence of Secret Tribunals

Today, foreign corporations, along with the billionaires who own them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of business advocates. These proceedings are conducted behind closed doors. In contrast to domestic courts, these tribunals grant no right of appeal or oversight by judges. The general public cannot take a case to them, nor can our government, including enterprises based in this country. Access is granted only to businesses based overseas.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These sums are based not on real financial harm but compensation the panel members decide the company would perhaps have made. The government could be forced to rescind the measure. It becomes hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A System Growing Exponentially

Record numbers of legal actions are being brought, as firms observe each other, and hedge funds fund legal actions in return for a share of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the decisions enacted by elected bodies is that this clause has been inserted – without democratic mandate, and often in an atmosphere of extreme secrecy – within bilateral investment treaties.

A Concrete Example: The UK Coal Mine

Last year, a conservation group secured a significant win at the High Court. The presiding officer determined that schemes to open the first deep coalmine in the UK for three decades, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on our carbon budgets. The Labour government subsequently revoked the consent the former government had approved. Today, this legal outcome faces being overturned by an secret arbitration panel answering to no one but the entities bringing the case.

During August, a company whose ultimate owners are located in the tax haven lodged a claim versus the UK government. Last week a arbitration panel in the US capital was convened to hear it.

The company is litigating against the UK for the profits it would have generated 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 in opposition to the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The government makes a decision, the domestic court upholds it, then a international entity contests it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

Concurrently that the panel on the coalmine case was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case to date, but it is highly possible that he will utilise the ISDS mechanism to challenge the penalties the UK enacted against him after the Russian aggression. He has already started suing a small nation for this reason, claiming $16bn: an amount representing half state's yearly budget. Among the legal team acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

International law scholars believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over democratic administrations may be obstructing the money Ukraine urgently requires.

Misleading Claims and Escalating Costs

We were assured that these scenarios wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic labelled campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Predictions that “when companies start to realise the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That threat has come to pass. This year, fossil fuel and extraction companies have filed a record number of suits against nations both wealthy and developing, contesting – similar to the Whitehaven project – government attempts to prevent global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP