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Can you reckon our political system operates? It could be similar to this. The public votes for MPs. They vote on bills. If a majority is secured, the bills pass into law. The law is maintained by the courts. That's it. Well, that was how it operated in the past. Those days are over.

The Advent of Secret Tribunals

Nowadays, international firms, and the wealthy individuals that control them, are able to litigate against elected administrations for the laws they pass, at private courts composed of business advocates. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even businesses operating from this country. The door is open only to businesses based overseas.

If a tribunal determines that a legislative action might diminish the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

These sums are based not on actual losses but funds the panel members decide the company would perhaps have made. The state may have to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being initiated, as companies learn from each other, and private equity bankroll lawsuits for a share of a cut of the takings. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the rulings enacted by elected bodies is that this clause has been written – without public consent, and frequently under conditions of total confidentiality – inside bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the high court. The presiding officer ruled that plans to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The Labour government subsequently revoked the licence the Tories had issued. Today, this success faces being overturned by an secret arbitration panel reporting to exclusively the corporations petitioning it.

During August, a firm whose final controllers reside in the Cayman Islands filed a lawsuit challenging the UK government. Last week a tribunal in the US capital was established to adjudicate on it.

The company is litigating against the UK for the profits it might have made if the mine had received permission to go ahead. Citizens have little idea how much this sum represents. Who is acting on its behalf in opposition to the UK administration? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the penalties the UK levied against him following the war in Ukraine. He has already initiated proceedings against another European state on these grounds, seeking $16bn: equivalent to half of government’s annual revenue. Part of the legal team on his side? Cherie Blair, married to the previous PM.

Trade specialists argue that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over democratic administrations might be preventing the funds Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that such things could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to investment treaty upon trade deal and we have never seen a problem in the past.” An adviser on this issue accused critics of “alarmism … in reality, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states had to worry about such legal actions. Warnings that “as corporations begin to understand the power bestowed upon them, they will turn their attention from the poorer states to the strong ones” were greeted by widespread derision.

That warning is now a reality. Recently, fossil fuel and mining firms have initiated a historic level of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP