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What is your reckon our political system functions? Perhaps something like this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. End of story. Well, that was how it operated in the past. Those days are over.

The Rise of Secret Tribunals

Nowadays, foreign corporations, and the billionaires that control them, can sue nation states for the laws they pass, at offshore tribunals staffed by business advocates. The cases take place in secret. Differing from national judiciaries, these tribunals grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, including businesses based in this country. The door is open exclusively to entities based overseas.

If a tribunal determines that a government measure might diminish the corporation’s projected profits, it can award compensation of hundreds of millions, running into billions.

These sums constitute not actual losses but funds the tribunal officials conclude the company would perhaps have made. The state might be compelled to rescind the measure. It is deterred from passing future laws along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Historically high figures of disputes are being filed, as firms learn from each other, and private equity finance suits in exchange for a cut of the awards. The consequence? Sovereignty and popular rule are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the rulings taken by legislatures is that this clause has been written – without democratic mandate, and frequently under conditions of total confidentiality – within international trade agreements.

A Concrete Instance: The UK Coal Mine

A year ago, a conservation group won a great victory at the High Court. The presiding officer found that plans to dig the first new deep coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have no impact on climate commitments. The incoming administration subsequently revoked the consent the previous administration had issued. Now, this victory is under threat by an foreign court answering to no one but the entities bringing the case.

During August, a corporate entity whose final controllers reside in the tax haven lodged a claim challenging the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

The company is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. We have no clear indication how much this could amount to. What legal team is representing it challenging the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation contests it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

A Sanctions Case

On the same day that the tribunal on the coal mine dispute was established, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case at present, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK levied against him subsequent to the Russian aggression. He has initiated proceedings against a small nation with similar intent, claiming $16bn: equivalent to half of nation's yearly income. Part of the counsel on his side? Cherie Blair, wife of the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

Empty Promises and Mounting Risks

Politicians promised that these events were not possible. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this topic accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies start to realise the influence bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were met with scepticism.

That prediction is now a reality. Recently, energy and extraction companies have filed a record number of cases against nations rich and poor, opposing – similar to the Whitehaven project – official measures to stop global warming. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP