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Can you understand our political system works? It could be something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. That's it. Well, that was how it once functioned. No longer.

The Rise of Secret Tribunals

Nowadays, international firms, along with the oligarchs who own them, have the power to sue nation states for the laws they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these tribunals grant no right of appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even companies operating from this country. The door is open exclusively to businesses based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, running into billions.

This compensation constitute not tangible damages but compensation the arbitrators determine the company might otherwise have made. The state could be forced to abandon its policy. It will be discouraged from passing future laws of a similar nature, due to the risk of facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being brought, as companies observe each other, and private equity finance suits in return for a share of the awards. The result? National sovereignty and democracy are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the rulings taken by legislatures is that this stipulation has been written – absent public approval, and typically amid an atmosphere of extreme secrecy – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the high court. The judge found that schemes to dig the first deep coalmine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The Labour government subsequently revoked the permission the former government had issued. Today, this success faces being overturned by an secret arbitration panel reporting to no one but the entities bringing the case.

Last August, a company whose final controllers are located in the offshore financial centre initiated proceedings challenging the UK government. Recently a arbitration panel in Washington DC was set up to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had been permitted to proceed. Citizens have no idea how much this sum represents. Who is acting on its behalf against the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the national judiciary supports it, then a overseas corporation contests it through an secretive arbitration panel, and a elected official works for its behalf.

The Russian Case

Simultaneously that the tribunal on the coalmine case was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case to date, but it is highly possible that he will utilise the ISDS mechanism to contest the penalties the UK levied against him after the invasion of Ukraine. He has initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of state's yearly income. Among the counsel representing him there? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as guarantee for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

Empty Promises and Escalating Threats

Politicians promised that these scenarios could not occur. Previously, a senior politician, championing the most significant and hazardous of all such treaties, told us: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” An adviser on this matter accused critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries had to worry about ISDS claims. Predictions that “as corporations start to realise the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were met with scepticism.

That threat has now materialised. This year, oil and gas and mining firms have initiated a historic level of claims against nations both wealthy and developing, opposing – similar to the UK mine – state efforts to prevent environmental catastrophe. Firms have to date won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP