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Can you understand our system of government operates? It could be similar to this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. Well, that used to be how it once functioned. No longer.

The Rise of Secret Tribunals

Nowadays, overseas companies, or the billionaires behind them, are able to litigate against governments for the policies they pass, at private courts composed of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or legal review. You or I are unable to file a case to them, nor can our government, or even companies headquartered in this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy might diminish the corporation’s anticipated profits, it may order financial penalties of vast sums, running into billions.

These sums represent not actual losses but compensation the panel members determine the company could potentially have made. The state might be compelled to abandon its policy. It is discouraged from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of disputes are being brought, as companies observe each other, and hedge funds bankroll lawsuits in exchange for a cut of the settlements. The outcome? National sovereignty and popular rule are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the choices taken by elected bodies is that this clause has been inserted – absent public approval, and frequently under conditions of extreme secrecy – into bilateral investment treaties.

A Specific Case: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer found that plans to dig the first major coal mine in the UK for three decades, in northwest England, were unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have zero effect on national carbon targets. The incoming administration later cancelled the consent the Tories had issued. Today, this legal outcome is under threat by an offshore tribunal accountable to only the entities bringing the case.

Last August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. Last week a dispute settlement body in Washington DC was established to hear it.

The claimant is suing the UK for the money it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. What legal team is serving as its counsel against the British government? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The government passes a law, the domestic court validates it, then a international entity contests it through an unaccountable private court, and a elected official works for its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case to date, but it seems likely that he will utilise the ISDS mechanism to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, demanding sixteen billion dollars: an amount representing half government’s annual revenue. Among the lawyers acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts believe that the EU’s delay in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations could be blocking the money Ukraine urgently requires.

Misleading Claims and Growing Costs

We were assured that these events wouldn’t happen. Years ago, a former prime minister, advocating for the largest and riskiest of all investment pacts, told us: “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 fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That threat has now materialised. Recently, oil and gas and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, contesting – as in the case of the UK mine – official measures to stop climate breakdown. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP