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How do you understand our political system functions? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills become law. Statutes is maintained by the courts. Simple as that. However, that used to be how it once functioned. No longer.

The Advent of Secret Tribunals

Today, foreign corporations, and the billionaires that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these tribunals grant no right of appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, including companies operating from this country. They are open solely for corporations operating from foreign soil.

If a tribunal rules that a government measure could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but compensation the panel members decide the company could potentially have made. The state might be compelled to drop the legislation. It is hesitant to enacting future policies in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and hedge funds fund legal actions in exchange for a portion of the takings. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the rulings made by elected bodies is that this stipulation has been written – without democratic mandate, and frequently under a climate of extreme secrecy – inside international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The judge determined that plans to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on climate commitments. The new government later cancelled the consent the previous administration had approved. Now, this legal outcome faces being overturned by an foreign court accountable to only the corporations filing the suit.

Last August, a corporate entity whose final controllers reside in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in the US capital was convened to adjudicate on it.

The claimant is litigating against the UK for the money it might have made if the mine had received permission to go ahead. The public has little idea how much this might be. Which individual is acting on its behalf in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company challenges it through an secretive private court, and a elected official works for its behalf.

A Sanctions Challenge

Simultaneously that the court on the coalmine case was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he may employ the tribunal to challenge the penalties the UK imposed on him after the war in Ukraine. He has already started suing a small nation for this reason, claiming $16bn: an amount representing half government’s yearly income. Part of the lawyers representing him there? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s hesitation in leveraging immobilised Russian assets as security for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over elected governments may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Mounting Risks

Politicians promised that such things wouldn’t happen. Years ago, a senior politician, advocating for the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this matter accused critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries should be concerned by such legal actions. Predictions that “once firms grasp the influence they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That prediction has come to pass. Recently, energy and resource corporations have initiated a record number of cases against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP