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Can you reckon our political system functions? It could be something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. Well, that used to be how it used to work. No longer.

The Advent of Secret Tribunals

Today, foreign corporations, or the oligarchs who own them, can sue governments for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes take place behind closed doors. In contrast to domestic courts, these bodies provide no right of appeal or judicial review. You or I cannot take a case to them, just as our government, including enterprises operating from this country. Access is granted only to entities based overseas.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

This compensation are based not on real financial harm but money the tribunal officials decide the company might otherwise have made. The state may have to abandon its policy. It is hesitant to passing future laws along the same lines, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of disputes are being brought, as companies observe each other, and hedge funds finance suits in return for a portion of the awards. The outcome? Democratic sovereignty and popular rule are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the decisions enacted by legislatures is that this provision has been incorporated – without democratic mandate, and often in a climate of total confidentiality – within international trade agreements.

A Concrete Case: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice determined that schemes to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration later cancelled the licence the previous administration had granted. Now, this legal outcome is under threat by an offshore tribunal accountable to exclusively the entities bringing the case.

During August, a company whose ultimate owners are located in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a dispute settlement body in Washington DC was set up to consider the case.

The claimant is suing the UK for the revenue it would have generated if the mine had been permitted to proceed. The public has no clear indication how much this might be. Who is serving as its counsel challenging the state? An elected representative, and ex-law officer in the outgoing administration, the noted patriot the MP. The government makes a decision, the domestic court validates it, then a foreign company contests it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the court 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. Details are little of the case to date, but it seems likely that he may employ the arbitration process to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has filed a claim against Luxembourg for this reason, seeking a colossal sum: an amount representing half state's yearly income. Included in the legal team representing him there? Cherie Blair, married to the previous PM.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Costs

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” A consultant on this topic described activists of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by ISDS claims. Warnings that “when companies begin to understand the authority they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That threat has now materialised. Recently, fossil fuel and extraction companies have lodged a record number of claims against nations both wealthy and developing, challenging – similar to the UK mine – government attempts to halt global warming. Corporations have so far won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP