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Can you reckon our political system functions? It could be similar to this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that was how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Today, foreign corporations, and the billionaires that control them, are able to litigate against governments for the policies they pass, at secret arbitration panels staffed by business advocates. These proceedings are held in secret. In contrast to domestic courts, these panels grant no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises operating from this country. Access is granted only to businesses operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards are based not on tangible damages but money the arbitrators decide the company would perhaps have made. The government may have to drop the legislation. It is discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A System Growing Exponentially

Historically high figures of legal actions are being filed, as firms learn from each other, and hedge funds finance suits in exchange for a cut of the settlements. The result? Sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the choices taken by legislatures is that this provision has been inserted – absent public approval, and often in an atmosphere of extreme secrecy – inside international trade agreements.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The presiding officer ruled that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The Labour government later cancelled the consent the previous administration had approved. Today, this legal outcome could be compromised by an offshore tribunal answering to no one but the companies filing the suit.

Last August, a corporate entity whose final controllers are located in the tax haven initiated proceedings against the UK government. Last week a dispute settlement body in the United States was convened to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. The public has no idea how much this sum represents. Which individual is serving as its counsel in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation challenges it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case at present, but it appears probable that he’ll use the tribunal to fight the penalties the UK levied against him after the war in Ukraine. He has previously initiated proceedings against Luxembourg for this reason, demanding a colossal sum: an amount representing half nation's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in leveraging immobilised state funds as collateral for its financial support package arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Costs

Politicians promised that such things were not possible. Previously, a senior politician, championing the largest and riskiest of all these agreements, stated: “The UK has signed trade deal upon trade deal and there has never been a case in the past.” An adviser on this topic accused activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by such legal actions. Predictions that “when companies grasp the authority bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were greeted by scepticism.

That prediction is now a reality. This year, fossil fuel and resource corporations have lodged a historic level of cases against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – government attempts to prevent global warming. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP