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How do you reckon our system of government operates? Maybe something like this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that was how it operated in the past. Not anymore.

The Emergence of Secret Tribunals

In the modern era, international firms, or the wealthy individuals that control them, have the power to sue governments for the policies they pass, at private courts staffed by commercial attorneys. The cases are conducted behind closed doors. Differing from national judiciaries, these tribunals allow 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 headquartered in this country. They are open exclusively to businesses operating from foreign soil.

Should an arbitration panel finds that a legislative action may compromise the corporation’s expected profits, it may order compensation of vast sums, even billions.

This compensation constitute not tangible damages but compensation the tribunal officials conclude the company might otherwise have made. The administration might be compelled to drop the legislation. It will be discouraged from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as firms learn from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The consequence? Sovereignty and democracy are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings made by legislatures is that this clause has been incorporated – without democratic mandate, and often in a climate of profound opacity – within international trade agreements.

A Specific Example: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice determined that schemes to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no consequence on climate commitments. The new government then withdrew the licence the former government had issued. Now, this success is under threat by an foreign court answering to exclusively the companies bringing the case.

In August, a corporate entity whose final controllers reside in the tax haven lodged a claim against the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had been allowed to commence operations. Citizens have little idea how much this might be. Who is acting on its behalf against the UK administration? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a international entity challenges it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coalmine case was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case so far, but it appears probable that he may employ the arbitration process to contest the penalties the UK levied against him after the invasion of Ukraine. He has started suing Luxembourg for this reason, seeking a colossal sum: an amount representing half nation's annual revenue. Included in the lawyers on his side? Cherie Blair, spouse of the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as collateral for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over democratic administrations might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Threats

The public was told that these events were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade deal upon trade deal and there has not been a problem in the past.” An adviser on this topic accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear these lawsuits. Predictions that “when companies grasp the power they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were met with widespread derision.

That prediction has come to pass. Recently, oil and gas and resource corporations have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – official measures to halt global warming. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP