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How do you understand our system of government operates? Maybe something like this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. The law is maintained by the courts. That's it. However, that was how it once functioned. Not anymore.

The Advent of Secret Tribunals

Today, overseas companies, or the billionaires that control them, are able to litigate against governments for the laws they pass, at secret arbitration panels made up of commercial attorneys. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, including companies based in this country. The door is open only to entities registered abroad.

Should an arbitration panel determines that a government measure could harm the corporation’s projected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums are based not on real financial harm but money the arbitrators conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It will be discouraged from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as companies observe each other, and investment funds fund legal actions in return for a portion of the settlements. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions taken by legislatures is that this clause has been written – absent public approval, and frequently under an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer determined that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on climate commitments. The incoming administration later cancelled the consent the Tories had granted. Today, this success is under threat by an foreign court answering to no one but the companies petitioning it.

During August, a firm whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. Last week a tribunal in Washington DC was convened to adjudicate on it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to go ahead. We have little idea how much this might be. Which individual is representing it in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Case

On the same day that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case at present, but it is highly possible that he’ll use the arbitration process to fight the penalties the UK levied against him after the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, seeking a colossal sum: equivalent to half of government’s yearly budget. Among the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen oligarchs' funds as collateral for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Threats

We were assured that these scenarios could not occur. Previously, a government leader, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade deal upon trade deal and there has not been a case in the past.” An adviser on this topic accused campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations should be concerned by these lawsuits. Predictions that “when companies begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were met with general mockery.

That threat has come to pass. Recently, oil and gas and mining firms have lodged a historic level of cases against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to stop climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP