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What is your understand our political system operates? Perhaps similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. Yet, that was how it once functioned. Those days are over.

The Rise of Secret Tribunals

Today, foreign corporations, along with the oligarchs who own them, have the power to sue nation states for the regulations they pass, at secret arbitration panels made up of corporate lawyers. These proceedings take place away from public scrutiny. Differing from national judiciaries, these tribunals provide no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even enterprises headquartered in this country. They are open solely for entities operating from foreign soil.

If a tribunal determines that a legislative action may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These awards are based not on real financial harm but compensation the arbitrators determine the company would perhaps have made. The administration may have to abandon its policy. It is deterred from passing future laws of a similar nature, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of disputes are being filed, as firms observe each other, and hedge funds finance suits in return for a share of the settlements. The consequence? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions enacted by parliaments is that this provision has been incorporated – without democratic mandate, and frequently under a climate of profound opacity – within bilateral investment treaties.

A Real-World Case: The UK Coal Mine

Last year, a conservation group won a great victory at the senior court. The judge ruled that plans to excavate the first major coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on climate commitments. The incoming administration later cancelled the licence the previous administration had issued. Currently, this victory is under threat by an offshore tribunal accountable to only the corporations filing the suit.

In August, a company whose beneficial owners are based in the tax haven filed a lawsuit versus the UK government. The previous week a tribunal in the United States was established to consider the case.

The company is suing the UK for the money it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this sum represents. Which individual is acting on its behalf in opposition to the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

The Russian Challenge

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case so far, but it is highly possible that he’ll use the arbitration process to challenge the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has previously filed a claim against Luxembourg on these grounds, claiming sixteen billion dollars: half that government’s yearly income. Part of the lawyers acting for him in that case? Cherie Blair, married to the previous PM.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as security for its financial support package stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Growing Risks

We were assured that these events were not possible. Previously, a government leader, promoting the largest and riskiest of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has not been a problem in the past.” An expert on this issue accused activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “when companies start to realise the power they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were met with widespread derision.

That threat is now a reality. Recently, oil and gas and mining firms have lodged a record number of suits against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP