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How do you reckon our political system operates? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Legislation is upheld by the courts. Simple as that. Well, that was how it used to work. No longer.

The Emergence of Secret Tribunals

Today, overseas companies, along with the billionaires who own them, are able to litigate against elected administrations for the laws they pass, at private courts composed of commercial attorneys. The cases take place behind closed doors. Unlike our courts, these tribunals allow no right of appeal or legal review. You or I are barred from bringing a case to them, just as our government, or even businesses operating from this country. The door is open only to businesses operating from foreign soil.

If a tribunal determines that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards represent not actual losses but money the panel members decide the company would perhaps have made. The administration might be compelled to abandon its policy. It is deterred from enacting future policies in that area, worried about incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of disputes are being brought, as companies observe each other, and private equity finance suits for a share of a portion of the takings. The consequence? National sovereignty and popular rule are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the rulings enacted by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid conditions of extreme secrecy – into trade treaties.

A Real-World Instance: The UK Coal Mine

Last year, activists achieved a major legal triumph at the high court. The presiding officer found that proposals to excavate the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the permission the Tories had approved. Currently, this victory faces being overturned by an foreign court answering to no one but the corporations filing the suit.

Last August, a company whose beneficial owners are located in the offshore financial centre lodged a claim against the UK government. Last week a arbitration panel in Washington DC was convened to consider the case.

This firm is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. We have little idea how much this could amount to. Who is representing it against the state? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot the MP. The state passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it appears probable that he’ll use the tribunal to challenge the penalties the UK enacted against him after the invasion of Ukraine. He has previously started suing a small nation for this reason, demanding $16bn: half that nation's yearly income. Among the counsel representing him there? Cherie Blair, married to the previous PM.

Legal experts argue that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these events wouldn’t happen. In 2014, a government leader, promoting the largest and riskiest of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this issue accused critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about these lawsuits. Predictions that “as corporations begin to understand the authority they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That prediction has now materialised. In the current period, oil and gas and mining firms have lodged a historic level of claims against nations rich and poor, challenging – like the example of the UK mine – state efforts to stop climate breakdown. Companies have so far won $114bn through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP