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Can you perceive our system of government works? Maybe along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Legislation are enforced by the courts. End of story. Well, that used to be how it operated in the past. No longer.

The Rise of Secret Tribunals

In the modern era, overseas companies, and the wealthy individuals who own them, can sue elected administrations for the regulations they pass, at private courts made up of business advocates. The cases take place away from public scrutiny. Unlike our courts, these bodies allow no avenue for appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, including companies operating from this country. The door is open only to entities based overseas.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it can award compensation of vast sums, potentially billions.

This compensation constitute not actual losses but funds the arbitrators decide the company would perhaps have made. The government might be compelled to rescind the measure. It is deterred from passing future laws along the same lines, worried about facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being brought, as firms take cues from each other, and private equity finance suits in exchange for a share of the awards. The consequence? Democratic sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the choices enacted by elected bodies is that this stipulation has been incorporated – without democratic mandate, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Concrete Case: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer determined that plans to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on climate commitments. The Labour government later cancelled the consent the former government had issued. Currently, this success faces being overturned by an offshore tribunal reporting to exclusively the entities petitioning it.

Last August, a firm whose ultimate owners reside in the tax haven lodged a claim against the UK government. Last week a arbitration panel in Washington DC was set up to consider the case.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Which individual is acting on its behalf against the UK administration? A sitting MP, and ex-law officer in the outgoing administration, that great patriot the MP. The administration makes a decision, the domestic court supports it, then a international entity disputes it through an unaccountable offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case at present, but it appears probable that he will utilise the ISDS mechanism to challenge the sanctions the UK enacted against him following the war in Ukraine. He has previously started suing Luxembourg on these grounds, claiming a colossal sum: half that state's yearly budget. Among the lawyers acting for him in that case? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as collateral for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Mounting Threats

We were assured that such things wouldn’t happen. Previously, a government leader, promoting the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and there has not been a case in the past.” A consultant on this issue labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear ISDS claims. Predictions that “as corporations begin to understand the authority they’ve been granted, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That warning has come to pass. Recently, fossil fuel and extraction companies have initiated a unprecedented number of cases against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – government attempts to prevent climate breakdown. Firms have thus far won vast sums via ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP