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Can you understand our system of government operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. End of story. Well, that used to be how it operated in the past. No longer.

The Advent of Secret Tribunals

In the modern era, international firms, and the billionaires behind them, can sue governments for the laws they pass, at offshore tribunals staffed by business advocates. Such disputes take place away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. The door is open solely for corporations operating from foreign soil.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards represent not real financial harm but compensation the tribunal officials determine the company could potentially have made. The government might be compelled to abandon its policy. It is hesitant to introducing similar legislation of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies observe each other, and investment funds fund legal actions in exchange for a cut of the takings. The consequence? Democratic sovereignty and popular rule are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the rulings taken by legislatures is that this provision has been incorporated – without public consent, and often in conditions of total confidentiality – into international trade agreements.

A Real-World Instance: The Cumbrian Coalmine

A year ago, activists secured a significant win at the senior court. The judge determined that proposals to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine would have had no impact on our carbon budgets. The new government subsequently revoked the permission the former government had approved. Currently, this success could be compromised by an offshore tribunal reporting to exclusively the entities petitioning it.

During August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to commence operations. The public has no idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The government passes a law, the high court upholds it, then a foreign company challenges it through an secretive arbitration panel, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case so far, but it is highly possible that he will utilise the ISDS mechanism to challenge the restrictions the UK levied against him following the Russian aggression. He has already filed a claim against another European state on these grounds, seeking $16bn: half that nation's annual revenue. Part of the lawyers on his side? the wife of a former prime minister, wife of the previous PM.

Legal experts contend that the EU’s delay in leveraging immobilised oligarchs' funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Growing Costs

Politicians promised that these events could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An expert on this matter labelled campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Warnings that “when companies begin to understand the influence bestowed upon them, they will turn their attention from the poorer states to the strong ones” were greeted by general mockery.

That threat is now a reality. Recently, energy and extraction companies have lodged a record number of cases against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP