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How do you perceive our system of government functions? Perhaps similar to this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills become law. The law is upheld by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Advent of Secret Tribunals

Nowadays, overseas companies, along with the wealthy individuals that control them, have the power to sue governments for the policies they pass, at offshore tribunals composed of business advocates. These proceedings are held away from public scrutiny. Differing from national judiciaries, these tribunals grant no opportunity to appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. They are open only to entities registered abroad.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, potentially billions.

These sums constitute not real financial harm but compensation the panel members determine the company would perhaps have made. The government might be compelled to rescind the measure. It becomes hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being brought, as corporations learn from each other, and investment funds finance suits in return for a cut of the awards. The consequence? Sovereignty and popular rule are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the rulings enacted by parliaments is that this provision has been incorporated – absent public approval, and often in conditions of profound opacity – into trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the high court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the permission the former government had approved. Today, this legal outcome faces being overturned by an secret arbitration panel reporting to no one but the corporations bringing the case.

During August, a company whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the United States was convened to adjudicate on it.

The company is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. We have little idea how much this might be. What legal team is representing it in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The government enacts a policy, the national judiciary supports it, then a overseas corporation disputes it through an secretive private court, and a elected official acts on its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case so far, but it appears probable that he’ll use the ISDS mechanism to fight the restrictions the UK levied against him following the invasion of Ukraine. He has filed a claim against Luxembourg on these grounds, claiming a colossal sum: half that nation's yearly income. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

False Assurances and Mounting Threats

The public was told that such things could not occur. Years ago, a senior politician, promoting the largest and riskiest of all such treaties, told us: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this issue accused critics of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about ISDS claims. Predictions that “as corporations start to realise the power they now possess, they will redirect their efforts from the weak nations to the developed economies” were dismissed with scepticism.

That threat is now a reality. Recently, oil and gas and mining firms have filed a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to stop global warming. Corporations have thus far won $114bn by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP