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What is your understand our political system operates? Perhaps something like this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills pass into law. Statutes is upheld by the courts. End of story. However, that’s how it used to work. No longer.

The Rise of Secret Tribunals

In the modern era, international firms, or the billionaires that control them, are able to litigate against governments for the regulations they pass, at offshore tribunals made up of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these bodies grant no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises operating from this country. The door is open exclusively to corporations registered abroad.

Should an arbitration panel rules that a legislative action might diminish the corporation’s expected profits, it may order damages of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but compensation the tribunal officials decide the company would perhaps have made. The administration could be forced to drop the legislation. It will be deterred from introducing similar legislation in that area, for fear of being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations take cues from each other, and private equity fund legal actions in exchange for a share of the settlements. The consequence? Sovereignty and democratic governance are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices taken by parliaments is that this clause has been incorporated – without public consent, and typically amid a climate of profound opacity – within bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The judge ruled that proposals to dig the first major coal mine in the UK for three decades, in northwest England, were wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on climate commitments. The new government later cancelled the licence the former government had approved. Now, this success is under threat by an foreign court answering to exclusively the entities bringing the case.

In August, a firm whose final controllers reside in the offshore financial centre initiated proceedings against the UK government. Last week a dispute settlement body in the US capital was set up to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this could amount to. Who is acting on its behalf challenging the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The state makes a decision, the national judiciary validates it, then a international entity challenges it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case so far, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK enacted against him after the Russian aggression. He has already filed a claim against another European state with similar intent, seeking a colossal sum: half that government’s yearly budget. Included in the legal team representing him there? Cherie Blair, spouse of the previous PM.

Trade specialists believe that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Growing Threats

We were assured that these scenarios could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all these agreements, stated: “Britain has agreed to investment treaty upon trade deal and there has never been a issue in the past.” An expert on this topic accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear such legal actions. Predictions that “once firms start to realise the power bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by general mockery.

That warning has now materialised. Recently, fossil fuel and resource corporations have initiated a record number of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – official measures to prevent climate breakdown. Firms have thus far won vast sums through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP