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What is your perceive our political system functions? It could be something like this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. The law is maintained by the courts. End of story. Yet, that’s how it once functioned. Not anymore.

The Advent of Secret Tribunals

Today, foreign corporations, along with the wealthy individuals who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are held away from public scrutiny. Differing from national judiciaries, these bodies grant no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies operating from this country. They are open exclusively to entities registered abroad.

When a secret court determines that a legislative action could harm the corporation’s expected profits, it has the power to grant compensation of vast sums, running into billions.

These awards represent not tangible damages but funds the arbitrators determine the company could potentially have made. The government could be forced to rescind the measure. It becomes deterred from enacting future policies in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as corporations observe each other, and investment funds bankroll lawsuits in return for a portion of the settlements. The consequence? National sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the decisions enacted by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – inside trade treaties.

A Concrete Example: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The justice determined that schemes to excavate the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine would have had zero effect on our carbon budgets. The new government then withdrew the licence the previous administration had issued. Now, this legal outcome is under threat by an secret arbitration panel reporting to no one but the entities petitioning it.

In August, a company whose beneficial owners reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is litigating against the UK for the money it could have earned if the mine had been allowed to commence operations. The public has no idea how much this might be. Which individual is serving as its counsel challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

On the same day that the court on the coalmine case was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it seems likely that he’ll use the tribunal to contest the sanctions the UK levied against him after the Russian aggression. He has previously initiated proceedings against another European state for this reason, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Included in the counsel acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists believe that the EU’s delay in using frozen state funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations may be obstructing the finance Ukraine urgently requires.

Empty Promises and Mounting Risks

Politicians promised that such things could not occur. In 2014, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” An adviser on this topic described critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “as corporations grasp the authority they’ve been granted, they will shift their focus from the weak nations to the developed economies” were greeted by general mockery.

That warning is now a reality. Recently, oil and gas and resource corporations have lodged a unprecedented number of cases against nations rich and poor, opposing – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have thus far won vast sums through ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP