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What is your understand our system of government operates? It could be along the lines of this. We elect MPs. They vote on bills. Should a majority is secured, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Advent of Offshore Tribunals

Today, international firms, or the wealthy individuals behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. Such disputes are conducted behind closed doors. Unlike our courts, these tribunals grant no right of appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even companies headquartered in this country. The door is open solely for businesses registered abroad.

When a secret court finds that a law or policy could harm the corporation’s expected profits, it may order damages of hundreds of millions, potentially billions.

These awards are based not on actual losses but funds 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 being sued.

A Process Growing Exponentially

Historically high figures of cases are being initiated, as companies learn from each other, and private equity fund legal actions for a share of a share of the takings. The outcome? National sovereignty and democratic governance are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions made by legislatures is that this stipulation has been inserted – absent public approval, and often in a climate of extreme secrecy – inside trade treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, activists won a great victory at the High Court. The judge found that plans to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have no impact on climate commitments. The new government subsequently revoked the consent the former government had approved. Today, this victory could be compromised by an foreign court accountable to no one but the companies petitioning it.

In August, a corporate entity whose final controllers are located in the tax haven initiated proceedings against the UK government. Recently a arbitration panel in the United States was established to adjudicate on it.

The claimant is suing the UK for the revenue it would have generated if the mine had been permitted to go ahead. We have little idea how much this sum represents. Who is acting on its behalf against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The administration makes a decision, the high court supports it, then a foreign company challenges it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Case

Simultaneously that the panel on the coalmine case was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he may employ the arbitration process to challenge the penalties the UK levied against him after the invasion of Ukraine. He has started suing another European state for this reason, seeking sixteen billion dollars: half that government’s annual revenue. Among the counsel representing him there? Cherie Blair, spouse of the previous PM.

Trade specialists believe that the EU’s hesitation in utilising seized Russian assets as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that these events were not possible. Years ago, a government leader, promoting the largest and riskiest of all such treaties, told us: “The UK has signed trade deal after trade deal and there has never been a case in the past.” A consultant on this issue labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by such legal actions. Warnings that “when companies start to realise the power bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That prediction is now a reality. Recently, fossil fuel and mining firms have initiated a unprecedented number of claims against nations rich and poor, opposing – like the example of the Whitehaven project – government attempts to halt climate breakdown. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP