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How do you understand our system of government functions? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. Simple as that. Yet, that was how it once functioned. Those days are over.

The Rise of Secret Tribunals

Today, foreign corporations, or the billionaires who own them, are able to litigate against governments for the laws they pass, at private courts made up of corporate lawyers. Such disputes are conducted behind closed doors. In contrast to domestic courts, these panels provide no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even companies operating from this country. They are open exclusively to corporations operating from foreign soil.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

These awards constitute not actual losses but compensation the arbitrators determine the company could potentially have made. The state might be compelled to rescind the measure. It is hesitant to enacting future policies along the same lines, for fear of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as companies learn from each other, and investment funds fund legal actions for a share of a share of the awards. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the decisions taken by legislatures is that this provision has been incorporated – without democratic mandate, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Last year, activists secured a significant win at the senior court. The judge ruled that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine could have zero effect on climate commitments. The new government then withdrew the licence the former government had approved. Today, this legal outcome faces being overturned by an secret arbitration panel accountable to exclusively the corporations filing the suit.

During August, a company whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. The previous week a tribunal in the United States was convened to adjudicate on it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been permitted to go ahead. The public has little idea how much this could amount to. Who is representing it challenging the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a overseas corporation disputes it through an secretive arbitration panel, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case to date, but it is highly possible that he may employ the arbitration process to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has already filed a claim against a small nation for this reason, seeking $16bn: an amount representing half government’s yearly income. Among the lawyers acting for him in that case? Cherie Blair, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in using frozen state funds as collateral for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, secretive influence over elected governments might be preventing the money Ukraine critically depends on.

Misleading Claims and Growing Risks

Politicians promised that these scenarios could not occur. Years ago, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a problem in the past.” A consultant on this matter labelled campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries needed to fear ISDS claims. Warnings that “once firms start to realise the influence they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by general mockery.

That warning is now a reality. In the current period, oil and gas and mining firms have initiated a historic level of cases against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – official measures to prevent climate breakdown. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP