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What is your reckon our system of government functions? Perhaps something like this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills become law. The law are enforced by the courts. Simple as that. Well, that’s how it once functioned. No longer.

The Rise of Secret Tribunals

In the modern era, foreign corporations, and the oligarchs behind them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by corporate lawyers. These proceedings are held behind closed doors. In contrast to domestic courts, these panels grant no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open exclusively to businesses registered abroad.

If a tribunal determines that a legislative action might diminish the corporation’s expected profits, it may order damages of vast sums, potentially billions.

This compensation constitute not actual losses but funds the arbitrators conclude the company could potentially have made. The government may have to rescind the measure. It will be discouraged from introducing similar legislation in that area, for fear of being sued.

A System Spiralling Out of Control

Record numbers of disputes are being brought, as corporations take cues from each other, and investment funds finance suits in return for a cut of the awards. The outcome? Sovereignty and democratic governance are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings enacted by legislatures is that this provision has been inserted – absent public approval, and frequently under an atmosphere of extreme secrecy – inside trade treaties.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the high court. The justice found that proposals to open the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have no impact on our carbon budgets. The incoming administration subsequently revoked the permission the former government had issued. Today, this legal outcome is under threat by an foreign court reporting to exclusively the companies filing the suit.

Last August, a firm whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had received permission to proceed. The public has no idea how much this might be. Who is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the Conservative government, that great patriot the MP. The government enacts a policy, the high court validates it, then a international entity contests it through an undemocratic private court, and a elected official represents its behalf.

The Russian Challenge

Simultaneously that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case so far, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK imposed on him after the war in Ukraine. He has filed a claim against another European state for this reason, demanding a colossal sum: an amount representing half state's annual revenue. Among the lawyers on his side? the wife of a former prime minister, married to the ex-UK leader.

Legal experts contend that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations could be blocking the finance Ukraine desperately needs.

Misleading Claims and Mounting Threats

Politicians promised that these scenarios were not possible. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty upon trade deal and there has never been a problem in the past.” A consultant on this issue described campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “when companies begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That prediction has come to pass. In the current period, energy and extraction companies have initiated a historic level of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained the majority. That represents the combined GDP