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Can you reckon our political system works? It could be along the lines of this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills become law. Legislation is upheld by the courts. Simple as that. However, that used to be how it used to work. Those days are over.

The Rise of Secret Arbitration Panels

In the modern era, foreign corporations, along with the oligarchs that control them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals made up of commercial attorneys. Such disputes take place in secret. Unlike our courts, these tribunals grant no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, or even enterprises operating from this country. They are open exclusively to entities registered abroad.

When a secret court determines that a law or policy could harm the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

These awards represent not actual losses but money the tribunal officials conclude the company could potentially have made. The administration might be compelled to rescind the measure. It becomes discouraged from introducing similar legislation in that area, for fear of facing litigation.

A System Running Rampant

Record numbers of cases are being brought, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a cut of the awards. The result? National sovereignty and democratic governance are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the decisions taken by parliaments is that this stipulation has been incorporated – without public consent, and often in an atmosphere of total confidentiality – within bilateral investment treaties.

A Concrete Case: The UK Coalmine

Last year, a conservation group won a great victory at the senior court. The judge found that plans to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the consent the former government had issued. Now, this victory could be compromised by an secret arbitration panel reporting to only the corporations bringing the case.

In August, a company whose ultimate owners are based in the Cayman Islands initiated proceedings versus the UK government. Last week a tribunal in Washington DC was established to hear it.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. We have little idea how much this might be. Which individual is serving as its counsel challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity challenges it through an unaccountable private court, and a sitting MP works for its behalf.

An Oligarch's Case

On the same day that the tribunal on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case at present, but it appears probable that he’ll use the arbitration process to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, claiming a colossal sum: half that government’s annual revenue. Among the counsel representing him there? Cherie Blair, wife of the former British prime minister.

Legal experts argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine desperately needs.

Empty Promises and Escalating Threats

The public was told that these events wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all such treaties, told us: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this topic labelled activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Warnings that “once firms start to realise the authority bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That prediction has come to pass. This year, oil and gas and resource corporations have filed a record number of suits against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to halt global warming. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP