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Can you understand our political system functions? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. The law are enforced by the courts. End of story. Yet, that used to be how it once functioned. Those days are over.

The Emergence of Secret Tribunals

In the modern era, international firms, and the oligarchs behind them, have the power to sue nation states for the laws they pass, at private courts made up of commercial attorneys. These proceedings take place away from public scrutiny. Unlike our courts, these bodies provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. They are open only to businesses registered abroad.

When a secret court finds that a law or policy could harm the corporation’s projected profits, it may order compensation of hundreds of millions, running into billions.

This compensation are based not on real financial harm but funds the tribunal officials determine the company might otherwise have made. The state might be compelled to abandon its policy. It becomes discouraged from introducing similar legislation in that area, due to the risk of being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The consequence? National sovereignty and democracy are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the decisions taken by elected bodies is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – into bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

Last year, a conservation group secured a significant win at the high court. The justice ruled that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have zero effect on national carbon targets. The incoming administration later cancelled the permission the Tories had issued. Today, this victory faces being overturned by an offshore tribunal reporting to only the companies petitioning it.

During August, a firm whose final controllers are located in the Cayman Islands initiated proceedings versus the UK government. Last week a tribunal in the United States was established to hear it.

The company is litigating against the UK for the money it might have made if the mine had received permission to proceed. Citizens have little idea how much this could amount to. What legal team is serving as its counsel challenging the state? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the national judiciary supports it, then a foreign company contests it through an undemocratic offshore tribunal, and a elected official represents its behalf.

The Russian Lawsuit

On the same day that the court on the mining lawsuit was convened, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it appears probable that he’ll use the tribunal to contest the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming sixteen billion dollars: an amount representing half nation's annual revenue. Part of the lawyers representing him there? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its financial support package stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Escalating Costs

Politicians promised that such things were not possible. Previously, a former prime minister, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An expert on this issue described campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “once firms start to realise the authority they now possess, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That prediction has now materialised. Recently, energy and mining firms have lodged a record number of claims against nations across the economic spectrum, challenging – like the example of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP