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Can you reckon our political system functions? It could be something like this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Legislation are enforced by the courts. End of story. Yet, that’s how it used to work. No longer.

The Rise of Secret Tribunals

In the modern era, overseas companies, and the oligarchs who own them, can sue nation states for the policies they pass, at private courts made up of business advocates. Such disputes are held behind closed doors. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even businesses headquartered in this country. The door is open only to corporations operating from foreign soil.

If a tribunal finds that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums are based not on tangible damages but money the panel members determine the company might otherwise have made. The government may have to drop the legislation. It will be deterred from introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as companies learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the awards. The result? Sovereignty and popular rule are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions taken by elected bodies is that this provision has been incorporated – absent public approval, and often in an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Example: The UK Coalmine

Twelve months ago, activists secured a significant win at the senior court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government then withdrew the permission the previous administration had granted. Today, this legal outcome could be compromised by an offshore tribunal reporting to no one but the corporations petitioning it.

Last August, a corporate entity whose beneficial owners reside in the tax haven lodged a claim challenging the UK government. Recently a arbitration panel in Washington DC was convened to consider the case.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. Which individual is representing it in opposition to the British government? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the national judiciary validates it, then a foreign company challenges it through an undemocratic private court, and a sitting MP acts on its behalf.

The Russian Challenge

On the same day that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case at present, but it is highly possible that he will utilise the tribunal to fight the penalties the UK levied against him following the war in Ukraine. He has already initiated proceedings against a small nation for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly income. Among the counsel acting for him in that case? Cherie Blair, spouse of the previous PM.

Legal experts believe that the EU’s delay in using frozen state funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine desperately needs.

Empty Promises and Escalating Risks

We were assured that these events wouldn’t happen. Years ago, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “We’ve signed investment treaty upon trade deal and there has not been a problem in the past.” An adviser on this matter accused activists of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “once firms start to realise the power bestowed upon them, they will turn their attention from the poorer states to the strong ones” were dismissed with widespread derision.

That prediction is now a reality. Recently, fossil fuel and resource corporations have initiated a unprecedented number of claims against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – official measures to prevent climate breakdown. Companies have thus far won $114bn via ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP