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How do you understand our political system works? It could be along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Statutes is upheld by the courts. Simple as that. Yet, that’s how it once functioned. Not anymore.

The Advent of Secret Tribunals

Nowadays, overseas companies, or the wealthy individuals that control them, have the power to sue nation states for the laws they pass, at offshore tribunals staffed by business advocates. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels provide no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, including businesses based in this country. The door is open solely for entities registered abroad.

If a tribunal determines that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not tangible damages but funds the panel members conclude the company might otherwise have made. The administration may have to abandon its policy. It will be hesitant to passing future laws in that area, due to the risk of being sued.

A Process Running Rampant

Historically high figures of legal actions are being initiated, as firms take cues from each other, and private equity fund legal actions in return for a portion of the takings. The result? National sovereignty and democracy are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the decisions enacted by parliaments is that this provision has been incorporated – without public consent, and frequently under a climate of profound opacity – within international trade agreements.

A Real-World Case: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the high court. The presiding officer determined that schemes to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration later cancelled the licence the former government had approved. Today, this victory is under threat by an foreign court reporting to only the companies filing the suit.

During August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings against the UK government. Recently a dispute settlement body in the United States was convened to hear it.

This firm is suing the UK for the revenue it might have made if the mine had been allowed to proceed. We have little idea how much this might be. What legal team is representing it challenging the UK administration? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the penalties the UK levied against him after the invasion of Ukraine. He has filed a claim against a small nation with similar intent, demanding sixteen billion dollars: half that nation's annual revenue. Included in the counsel representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s delay in using frozen Russian assets as security for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over elected governments might be preventing the finance Ukraine desperately needs.

Misleading Claims and Growing Risks

The public was told that such things could not occur. In 2014, a senior politician, advocating for the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a case in the past.” An expert on this matter accused critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “when companies start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were greeted by general mockery.

That prediction is now a reality. In the current period, energy and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – official measures to prevent global warming. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP