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How do you perceive our system of government operates? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. Well, that was how it operated in the past. Those days are over.

The Rise of Secret Tribunals

In the modern era, overseas companies, and the oligarchs behind them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these panels provide no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, including businesses based in this country. The door is open only to corporations registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These sums are based not on real financial harm but money the arbitrators conclude the company would perhaps have made. The state may have to rescind the measure. It becomes discouraged from introducing similar legislation in that area, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as firms learn from each other, and investment funds bankroll lawsuits in return for a portion of the awards. The result? National sovereignty and democratic governance are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the choices taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the high court. The justice determined that proposals to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the licence the Tories had approved. Currently, this victory faces being overturned by an foreign court reporting to exclusively the companies bringing the case.

In August, a company whose beneficial owners reside in the tax haven filed a lawsuit against the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is litigating against the UK for the money it would have generated if the mine had been allowed to commence operations. The public has no idea how much this sum represents. Who is acting on its behalf challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The administration enacts a policy, the high court validates it, then a international entity challenges it through an undemocratic private court, and a member of our parliament works for its behalf.

An Oligarch's Case

Concurrently that the panel on the coalmine case was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case at present, but it is highly possible that he’ll use the tribunal to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against a small nation with similar intent, claiming sixteen billion dollars: half that state's annual revenue. Among the lawyers on his side? a prominent lawyer, wife of the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Escalating Risks

Politicians promised that these events were not possible. Years ago, a senior politician, advocating for the most significant and hazardous of all investment pacts, told us: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” An expert on this topic accused critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “once firms start to realise the authority they now possess, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with scepticism.

That warning is now a reality. Recently, fossil fuel and mining firms have lodged a historic level of cases against nations rich and poor, challenging – similar to the UK mine – official measures to prevent global warming. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP