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How do you perceive our system of government functions? It could be something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Legislation is upheld by the courts. That's it. Yet, that was how it operated in the past. Those days are over.

The Advent of Secret Tribunals

Today, foreign corporations, and the oligarchs that control them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by business advocates. These proceedings are held away from public scrutiny. In contrast to domestic courts, these tribunals provide no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, including businesses operating from this country. Access is granted only to corporations based overseas.

If a tribunal rules that a government measure could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions, running into billions.

This compensation constitute not real financial harm but compensation the panel members conclude the company could potentially have made. The state could be forced to abandon its policy. It becomes hesitant to enacting future policies of a similar nature, worried about facing litigation.

A System Growing Exponentially

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and investment funds finance suits in return for a share of the takings. The result? National sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the decisions enacted by elected bodies is that this provision has been written – absent public approval, and often in conditions of extreme secrecy – inside bilateral investment treaties.

A Concrete Case: The UK Coal Mine

A year ago, a conservation group secured a significant win at the high court. The justice found that plans to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine would have zero effect on national carbon targets. The incoming administration subsequently revoked the permission the former government had approved. Today, this legal outcome could be compromised by an secret arbitration panel accountable to exclusively the entities bringing the case.

In August, a company whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in the US capital was established to hear it.

This firm is litigating against the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has no idea how much this sum represents. Which individual is serving as its counsel challenging the state? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a international entity contests it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the tribunal on the coalmine case was established, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it is highly possible that he may employ the tribunal to fight the sanctions the UK levied against him following the Russian aggression. He has previously initiated proceedings against Luxembourg with similar intent, claiming $16bn: an amount representing half state's yearly budget. Among the lawyers representing him there? the wife of a former prime minister, married to the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized state funds as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments could be blocking the funds Ukraine critically depends on.

False Assurances and Growing Costs

We were assured that these events could not occur. Previously, a senior politician, promoting the largest and riskiest of all investment pacts, stated: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An expert on this topic accused activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with widespread derision.

That threat has come to pass. In the current period, energy and resource corporations have lodged a record number of cases against nations rich and poor, challenging – like the example of the Whitehaven project – state efforts to halt global warming. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP