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How do you perceive our political system works? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. Yet, that’s how it once functioned. Those days are over.

The Advent of Secret Tribunals

Today, foreign corporations, or the oligarchs who own them, have the power to sue nation states for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings take place away from public scrutiny. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even businesses based in this country. Access is granted solely for businesses operating from foreign soil.

When a secret court finds that a legislative action could harm the corporation’s projected profits, it can award damages of vast sums, potentially billions.

These sums represent not real financial harm but funds the panel members decide the company could potentially have made. The administration could be forced to rescind the measure. It becomes deterred from passing future laws in that area, for fear of facing litigation.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as corporations observe each other, and private equity finance suits in exchange for a portion of the settlements. The outcome? Sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the rulings enacted by parliaments is that this stipulation has been written – without public consent, and often in an atmosphere of extreme secrecy – within international trade agreements.

A Real-World Instance: The UK Coalmine

Last year, activists secured a significant win at the high court. The justice determined that plans to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The Labour government subsequently revoked the permission the former government had issued. Today, this legal outcome could be compromised by an secret arbitration panel accountable to only the companies bringing the case.

Last August, a firm whose final controllers are based in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was set up to adjudicate on it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been allowed to proceed. Citizens have little idea how much this might be. Which individual is serving as its counsel challenging the state? An elected representative, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court validates it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coalmine case was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case so far, but it seems likely that he may employ the arbitration process to fight the penalties the UK imposed on him following the war in Ukraine. He has initiated proceedings against a small nation on these grounds, demanding a colossal sum: an amount representing half government’s annual revenue. Part of the legal team on his side? a prominent lawyer, wife of the former British prime minister.

Trade specialists believe that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over sovereign states could be blocking the funds Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that such things could not occur. Years ago, a senior politician, advocating for the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic labelled activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “once firms grasp the authority they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were met with general mockery.

That warning has now materialised. Recently, fossil fuel and extraction companies have lodged a unprecedented number of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to halt climate breakdown. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP