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Can you perceive our system of government works? It could be something like this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. Yet, that was how it operated in the past. Those days are over.

The Emergence of Secret Tribunals

Today, international firms, along with the billionaires behind them, have the power to sue nation states for the laws they pass, at private courts made up of corporate lawyers. These proceedings take place away from public scrutiny. Differing from national judiciaries, these tribunals provide no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses operating from this country. Access is granted exclusively to businesses registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s expected profits, it can award damages of hundreds of millions of pounds, running into billions.

These sums represent not actual losses but compensation the arbitrators decide the company could potentially have made. The state might be compelled to rescind the measure. It is hesitant to introducing similar legislation along the same lines, for fear of being sued.

A Process Running Rampant

Historically high figures of legal actions are being initiated, as corporations observe each other, and investment funds fund legal actions in exchange for a portion of the awards. The result? National sovereignty and popular rule are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the choices enacted by legislatures is that this provision has been inserted – without democratic mandate, and often in a climate of extreme secrecy – inside international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the High Court. The presiding officer ruled that proposals to dig the first deep coalmine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no consequence on national carbon targets. The new government subsequently revoked the licence the Tories had issued. Today, this victory faces being overturned by an secret arbitration panel reporting to only the companies filing the suit.

Last August, a corporate entity whose ultimate owners reside in the tax haven filed a lawsuit versus the UK government. Recently a arbitration panel in the United States was set up to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had been permitted to go ahead. Citizens have little idea how much this could amount to. Which individual is representing it in opposition to the UK administration? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The state enacts a policy, the domestic court supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Concurrently that the court on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case so far, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has filed a claim against another European state on these grounds, seeking sixteen billion dollars: half that state's yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars contend that the EU’s hesitation in using frozen state funds as security for its financial support package arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Mounting Costs

Politicians promised that these events wouldn’t happen. Previously, a senior politician, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this issue described activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “once firms begin to understand the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction is now a reality. This year, oil and gas and extraction companies have lodged a record number of claims against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP