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What is your understand our political system operates? Perhaps something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills pass into law. The law is upheld by the courts. Simple as that. Yet, that was how it operated in the past. No longer.

The Advent of Secret Tribunals

Today, overseas companies, and the oligarchs that control them, have the power to sue nation states for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases are conducted away from public scrutiny. Unlike our courts, these tribunals allow no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, including enterprises operating from this country. They are open only to entities based overseas.

Should an arbitration panel finds that a legislative action could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These sums constitute not actual losses but funds the arbitrators decide the company could potentially have made. The state might be compelled to abandon its policy. It becomes deterred from passing future laws in that area, worried about being sued.

A Process Growing Exponentially

Unprecedented levels of cases are being filed, as firms take cues from each other, and investment funds bankroll lawsuits for a share of a cut of the takings. The result? National sovereignty and democracy are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the rulings made by elected bodies is that this stipulation has been written – without democratic mandate, and typically amid a climate of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The judge found that schemes to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no consequence on our carbon budgets. The incoming administration later cancelled the permission the previous administration had issued. Now, this success could be compromised by an offshore tribunal answering to exclusively the entities petitioning it.

Last August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was set up to adjudicate on it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have no idea how much this might be. Which individual is representing it against the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the high court validates it, then a international entity contests it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it appears probable that he will utilise the tribunal to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has previously started suing another European state on these grounds, demanding $16bn: equivalent to half of state's yearly income. Among the counsel representing him there? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized state funds as guarantee for its financial support package is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over elected governments may be obstructing the funds Ukraine critically depends on.

Empty Promises and Growing Costs

We were assured that these scenarios were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” An expert on this topic labelled activists of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “as corporations grasp the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were greeted by general mockery.

That warning has now materialised. Recently, energy and resource corporations have filed a unprecedented number of cases against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have to date won $114bn through ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP