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Can you reckon our political system operates? It could be something like this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. The law are enforced by the courts. End of story. Well, that was how it once functioned. Those days are over.

The Rise of Secret Arbitration Panels

Today, overseas companies, and the wealthy individuals who own them, have the power to sue governments for the laws they pass, at private courts staffed by commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these tribunals provide no right of appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even businesses operating from this country. The door is open solely for businesses based overseas.

Should an arbitration panel finds that a legislative action might diminish the corporation’s projected profits, it can award damages of hundreds of millions of pounds, running into billions.

These sums represent not actual losses but money the tribunal officials decide the company could potentially have made. The government could be forced to abandon its policy. It is discouraged from enacting future policies along the same lines, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Record numbers of cases are being brought, as companies learn from each other, and investment funds bankroll lawsuits for a share of a portion of the takings. The consequence? Democratic sovereignty and democracy are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings made by legislatures is that this provision has been incorporated – without democratic mandate, and typically amid conditions of extreme secrecy – inside international trade agreements.

A Concrete Example: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The judge determined that plans to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on our carbon budgets. The Labour government then withdrew the consent the former government had issued. Today, this victory could be compromised by an offshore tribunal accountable to no one but the entities bringing the case.

In August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings versus the UK government. Recently a tribunal in the United States was set up to consider the case.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to commence operations. Citizens have no idea how much this might be. What legal team is acting on its behalf against the British government? An elected representative, and former attorney-general in the previous government, the noted patriot the MP. The administration enacts a policy, the domestic court validates it, then a foreign company contests it through an secretive private court, and a sitting MP works for its behalf.

A Sanctions Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case so far, but it seems likely that he will utilise the arbitration process to contest the sanctions the UK enacted against him following the war in Ukraine. He has previously started suing Luxembourg on these grounds, demanding a colossal sum: an amount representing half nation's yearly income. Included in the legal team on his side? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised state funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Growing Threats

The public was told that these scenarios were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, told us: “The UK has signed trade agreement upon trade deal and we have never seen a case in the past.” An expert on this topic labelled campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about such legal actions. Warnings that “as corporations start to realise the authority they now possess, they will turn their attention from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. Recently, energy and mining firms have initiated a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP