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Can you understand our political system works? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills pass into law. Statutes are enforced by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Advent of Secret Tribunals

Today, international firms, or the wealthy individuals who own them, have the power to sue nation states for the laws they pass, at offshore tribunals composed of corporate lawyers. Such disputes are conducted away from public scrutiny. Unlike our courts, these bodies provide no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even companies headquartered in this country. The door is open exclusively to entities operating from foreign soil.

When a secret court determines that a law or policy could harm the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

These sums constitute not tangible damages but funds the panel members determine the company might otherwise have made. The administration could be forced to drop the legislation. It becomes deterred from passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of cases are being filed, as companies observe each other, and private equity finance suits in return for a cut of the takings. The consequence? National sovereignty and popular rule are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the rulings taken by parliaments is that this provision has been written – without public consent, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Specific Example: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the high court. The justice found that schemes to dig the first major coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the licence the previous administration had approved. Today, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the companies petitioning it.

Last August, a company whose beneficial owners are located in the Cayman Islands lodged a claim versus the UK government. The previous week a dispute settlement body in Washington DC was established to adjudicate on it.

The company is litigating against the UK for the profits it would have generated if the mine had been allowed to proceed. We have no idea how much this sum represents. Who is representing it challenging the UK administration? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The government enacts a policy, the national judiciary validates it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case so far, but it appears probable that he will utilise the tribunal to fight the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already started suing a small nation on these grounds, demanding a colossal sum: an amount representing half government’s yearly income. Part of the lawyers acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in utilising seized oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Costs

We were assured that these scenarios wouldn’t happen. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “The UK has signed investment treaty upon trade deal and we have never seen a case in the past.” A consultant on this issue labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms start to realise the power bestowed upon them, they will turn their attention from the weak nations to the strong ones” were dismissed with widespread derision.

That prediction is now a reality. Recently, fossil fuel and mining firms have initiated a historic level of cases against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Firms have so far won $114bn through ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP