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Can you understand our political system operates? Maybe something like this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. Simple as that. Yet, that’s how it operated in the past. No longer.

The Rise of Secret Tribunals

Today, foreign corporations, or the wealthy individuals who own them, can sue elected administrations for the regulations they pass, at private courts staffed by commercial attorneys. These proceedings are held behind closed doors. Unlike our courts, these panels grant no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises based in this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court determines that a legislative action could harm the corporation’s projected profits, it may order damages of hundreds of millions of pounds, even billions.

These awards constitute not real financial harm but funds the arbitrators determine the company would perhaps have made. The administration might be compelled to rescind the measure. It is discouraged from passing future laws of a similar nature, due to the risk of facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as corporations take cues from each other, and investment funds finance suits for a share of a share of the awards. The consequence? National sovereignty and popular rule are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the decisions enacted by legislatures is that this stipulation has been incorporated – absent public approval, and typically amid an atmosphere of total confidentiality – within trade treaties.

A Specific Instance: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The judge determined that plans to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no consequence on our carbon budgets. The Labour government subsequently revoked the permission the Tories had issued. Now, this legal outcome could be compromised by an foreign court accountable to only the corporations petitioning it.

During August, a company whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. Last week a arbitration panel in the US capital was established to consider the case.

The company is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. Citizens have little idea how much this could amount to. What legal team is representing it in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The state makes a decision, the high court upholds it, then a overseas corporation contests it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Case

Concurrently that the court on the coalmine case was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already started suing another European state for this reason, seeking $16bn: half that government’s yearly income. Included in the counsel representing him there? a prominent lawyer, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over sovereign states may be obstructing the money Ukraine critically depends on.

False Assurances and Mounting Costs

The public was told that these events were not possible. In 2014, a former prime minister, promoting the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a case in the past.” An expert on this issue labelled activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “once firms begin to understand the power they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were met with widespread derision.

That warning is now a reality. This year, fossil fuel and extraction companies have initiated a unprecedented number of claims against nations rich and poor, contesting – like the example of the Whitehaven project – government attempts to prevent global warming. Companies have thus far won $114bn by using ISDS, of which oil majors have secured the majority. That equates to the combined GDP