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What is your reckon our system of government functions? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that was how it operated in the past. Those days are over.

The Rise of Secret Tribunals

Today, international firms, along with the billionaires that control them, are able to litigate against governments for the regulations they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are conducted behind closed doors. In contrast to domestic courts, these tribunals grant no right of appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even businesses based in this country. Access is granted exclusively to entities based overseas.

If a tribunal finds that a government measure could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards are based not on actual losses but funds the arbitrators decide the company might otherwise have made. The administration may have to drop the legislation. It will be deterred from enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of legal actions are being filed, as companies take cues from each other, and private equity bankroll lawsuits in return for a share of the settlements. The consequence? Democratic sovereignty and democracy are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the decisions enacted by parliaments is that this clause has been inserted – absent public approval, and frequently under conditions of extreme secrecy – inside bilateral investment treaties.

A Specific Example: The UK Coalmine

Last year, activists achieved a major legal triumph at the High Court. The judge found that proposals to open the first deep coalmine in the UK for three decades, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the consent the former government had issued. Now, this victory is under threat by an offshore tribunal accountable to no one but the entities bringing the case.

In August, a corporate entity whose final controllers are based in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in the United States was established to hear it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this might be. Which individual is acting on its behalf challenging the British government? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The state enacts a policy, the high court supports it, then a foreign company disputes it through an secretive private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it is highly possible that he may employ the arbitration process to contest the sanctions the UK imposed on him after the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, seeking a colossal sum: equivalent to half of state's yearly budget. Among the legal team on his side? Cherie Blair, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in utilising seized state funds as collateral for its financial support package arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Escalating Risks

Politicians promised that such things wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” An adviser on this topic labelled campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the influence they now possess, they will shift their focus from the weak nations to the strong ones” were met with scepticism.

That prediction has come to pass. This year, fossil fuel and extraction companies have lodged a unprecedented number of claims against nations across the economic spectrum, contesting – similar to the UK mine – official measures to prevent environmental catastrophe. Firms have to date won vast sums by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP