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How do you reckon our political system functions? It could be along the lines of this. The public votes for MPs. They vote on bills. When a majority is secured, the bills pass into law. The law is upheld by the courts. That's it. However, that was how it operated in the past. No longer.

The Rise of Secret Tribunals

In the modern era, international firms, or the billionaires who own them, have the power to sue nation states for the regulations they pass, at offshore tribunals composed of corporate lawyers. These proceedings are conducted behind closed doors. Unlike our courts, these tribunals allow no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even companies based in this country. They are open only to corporations based overseas.

Should an arbitration panel rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards constitute not tangible damages but money the arbitrators determine the company could potentially have made. The government may have to rescind the measure. It is deterred from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Running Rampant

Historically high figures of cases are being filed, as firms take cues from each other, and hedge funds finance suits in return for a share of the takings. The consequence? Sovereignty and democratic governance are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions enacted by legislatures is that this provision has been incorporated – without public consent, and often in conditions of profound opacity – inside bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners won a great victory at the high court. The presiding officer found that proposals to dig the first deep coalmine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have no consequence on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had granted. Now, this success could be compromised by an secret arbitration panel reporting to no one but the corporations filing the suit.

In August, a firm whose final controllers are located in the Cayman Islands lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was convened to consider the case.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has little idea how much this could amount to. Who is representing it in opposition to the UK administration? A sitting MP, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The administration passes a law, the domestic court supports it, then a foreign company disputes it through an undemocratic private court, and a sitting MP acts on its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coal mine dispute was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK enacted against him following the war in Ukraine. He has started suing another European state for this reason, demanding $16bn: half that nation's yearly income. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized state funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments could be blocking the finance Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that such things wouldn’t happen. Years ago, a government leader, championing the largest and riskiest of all investment pacts, stated: “We’ve signed trade agreement upon trade deal and there has not been a problem in the past.” An expert on this topic labelled critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “once firms grasp the power they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with widespread derision.

That warning is now a reality. In the current period, oil and gas and extraction companies have initiated a unprecedented number of claims against nations rich and poor, opposing – like the example of the Whitehaven project – state efforts to prevent climate breakdown. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP