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What is your understand our system of government operates? Maybe along the lines of this. We elect MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. Yet, that was how it once functioned. Those days are over.

The Advent of Secret Tribunals

In the modern era, international firms, and the billionaires who own them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. The cases are conducted away from public scrutiny. In contrast to domestic courts, these bodies provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, or even companies based in this country. Access is granted only to entities operating from foreign soil.

If a tribunal finds that a government measure may compromise the corporation’s expected profits, it has the power to grant financial penalties of vast sums, even billions.

This compensation are based not on real financial harm but compensation the tribunal officials determine the company could potentially have made. The government may have 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

Historically high figures of cases are being initiated, as firms take cues from each other, and investment funds bankroll lawsuits for a share of a share of the settlements. The consequence? National sovereignty and democracy are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the choices taken by legislatures is that this provision has been inserted – without public consent, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Example: The UK Coal Mine

Last year, a conservation group secured a significant win at the High Court. The judge found that schemes to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no consequence on our carbon budgets. The Labour government later cancelled the consent the previous administration had issued. Currently, this legal outcome is under threat by an foreign court reporting to only the companies filing the suit.

Last August, a firm whose final controllers reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was set up to hear it.

The company is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. Citizens have no idea how much this might be. What legal team is representing it in opposition to the British government? An elected representative, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a international entity contests it through an undemocratic private court, and a member of our parliament works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case at present, but it appears probable that he will utilise the arbitration process to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously started suing a small nation for this reason, demanding sixteen billion dollars: half that government’s annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts believe that the EU’s hesitation in leveraging immobilised state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

False Assurances and Escalating Costs

We were assured that these events could not occur. Previously, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this matter described activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were greeted by scepticism.

That warning has come to pass. In the current period, oil and gas and mining firms have lodged a record number of claims against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – official measures to prevent global warming. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP