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Can you understand our system of government works? Maybe along the lines of this. We elect MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Yet, that’s how it used to work. Not anymore.

The Emergence of Secret Tribunals

Today, foreign corporations, along with the billionaires behind them, have the power to sue elected administrations for the laws they pass, at offshore tribunals made up of commercial attorneys. These proceedings are conducted behind closed doors. In contrast to domestic courts, these panels provide no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses operating from this country. Access is granted solely for entities based overseas.

If a tribunal rules that a government measure may compromise the corporation’s anticipated profits, it may order damages of vast sums, potentially billions.

These sums constitute not real financial harm but compensation the arbitrators conclude the company would perhaps have made. The state may have to drop the legislation. It is hesitant to introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of cases are being filed, as companies take cues from each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The outcome? Sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices taken by parliaments is that this clause has been written – without public consent, and typically amid an atmosphere of profound opacity – within trade treaties.

A Real-World Case: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the High Court. The presiding officer determined that proposals to open the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have zero effect on climate commitments. The incoming administration later cancelled the consent the previous administration had approved. Now, this legal outcome is under threat by an foreign court reporting to no one but the companies bringing the case.

Last August, a firm whose final controllers reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a tribunal in Washington DC was convened to consider the case.

The claimant is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. Citizens have no idea how much this might be. Who is acting on its behalf challenging the state? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The state passes a law, the high court supports it, then a foreign company challenges it through an undemocratic private court, and a sitting MP represents its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case at present, but it seems likely 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 another European state with similar intent, demanding sixteen billion dollars: half that nation's yearly budget. Included in the lawyers representing him there? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the finance Ukraine critically depends on.

Empty Promises and Growing Threats

Politicians promised that these scenarios could not occur. Previously, a former prime minister, championing the biggest and most dangerous of all these agreements, stated: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An adviser on this matter described critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by such legal actions. Predictions that “when companies begin to understand the authority they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. Recently, oil and gas and resource corporations have lodged a record number of claims against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to stop global warming. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP