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How do you understand our political system works? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. End of story. Well, that used to be how it used to work. Not anymore.

The Advent of Secret Tribunals

Today, overseas companies, and the wealthy individuals behind them, can sue governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted in secret. Unlike our courts, these bodies provide no right of appeal or judicial review. The general public are barred from bringing a case to them, just as our government, including enterprises based in this country. Access is granted exclusively to businesses operating from foreign soil.

Should an arbitration panel finds that a law or policy may compromise the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards represent not tangible damages but money the arbitrators determine the company might otherwise have made. The administration might be compelled to abandon its policy. It becomes discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of legal actions are being initiated, as companies take cues from each other, and investment funds fund legal actions in return for a share of the takings. The consequence? National sovereignty and democracy are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the choices enacted by parliaments is that this clause has been inserted – without democratic mandate, and often in a climate of total confidentiality – into international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the senior court. The presiding officer found that plans to dig the first deep coalmine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have no consequence on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had issued. Now, this success could be compromised by an secret arbitration panel accountable to only the entities petitioning it.

During August, a corporate entity whose beneficial owners are located in the offshore financial centre initiated proceedings against the UK government. The previous week a arbitration panel in the US capital was convened to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had received permission to commence operations. The public has little idea how much this could amount to. Which individual is acting on its behalf in opposition to the state? A member of parliament, and former attorney-general in the previous government, that great patriot the MP. The government passes a law, the domestic court supports it, then a overseas corporation challenges it through an secretive private court, and a sitting MP works for its behalf.

The Russian Case

Concurrently that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the Russian aggression. He has filed a claim against Luxembourg on these grounds, seeking sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the counsel acting for him in that case? a prominent lawyer, married to the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized Russian assets as collateral for its financial support package is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

Empty Promises and Mounting Costs

The public was told that such things could not occur. Years ago, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” An adviser on this matter labelled activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “when companies grasp the power they now possess, they will turn their attention from the weak nations to the wealthy nations” were greeted by widespread derision.

That warning is now a reality. Recently, oil and gas and resource corporations have lodged a historic level of cases against nations both wealthy and developing, challenging – similar to the Whitehaven project – government attempts to stop climate breakdown. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP