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How do you perceive our political system functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Advent of Secret Tribunals

Today, foreign corporations, and the wealthy individuals that control them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings are held behind closed doors. Differing from national judiciaries, these tribunals allow no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, or even enterprises operating from this country. The door is open exclusively to businesses based overseas.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

These awards represent not real financial harm but funds the tribunal officials determine the company would perhaps have made. The state could be forced to drop the legislation. It becomes hesitant to passing future laws in that area, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms learn from each other, and private equity finance suits in return for a portion of the takings. The result? Sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the choices made by legislatures is that this clause has been written – absent public approval, and frequently under conditions of total confidentiality – within trade treaties.

A Real-World Case: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The presiding officer determined that schemes to dig the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine could have no impact on our carbon budgets. The new government subsequently revoked the licence the former government had approved. Today, this legal outcome could be compromised by an offshore tribunal answering to no one but the entities bringing the case.

In August, a firm whose beneficial owners are based in the tax haven initiated proceedings against the UK government. Last week a dispute settlement body in the United States was set up to hear it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. What legal team is acting on its behalf against the UK administration? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The administration passes a law, the high court validates it, then a international entity challenges it through an unaccountable private court, and a elected official works for its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coalmine case was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case to date, but it seems likely that he will utilise the ISDS mechanism to fight the restrictions the UK levied against him following the invasion of Ukraine. He has already started suing a small nation on these grounds, claiming a colossal sum: an amount representing half nation's yearly income. Among the counsel on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in utilising seized state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, advocating for the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An expert on this issue described campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That warning is now a reality. This year, fossil fuel and mining firms have lodged a record number of cases against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to stop global warming. Companies have thus far won $114bn via ISDS, of which energy giants have secured $84bn. That represents the combined GDP