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What is your perceive our political system works? It could be similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Statutes are enforced by the courts. End of story. Yet, that was how it operated in the past. Those days are over.

The Rise of Secret Tribunals

Nowadays, overseas companies, or the wealthy individuals who own them, are able to litigate against nation states for the laws they pass, at private courts made up of business advocates. These proceedings are conducted in secret. Unlike our courts, these bodies provide no right of appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, including businesses operating from this country. Access is granted solely for businesses operating from foreign soil.

Should an arbitration panel finds that a law or policy could harm the corporation’s expected profits, it may order financial penalties of vast sums, even billions.

This compensation are based not on actual losses but funds the panel members conclude the company would perhaps have made. The government might be compelled to abandon its policy. It becomes hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A System Running Rampant

Record numbers of legal actions are being initiated, as corporations learn from each other, and private equity bankroll lawsuits in return for a portion of the takings. The consequence? National sovereignty and democracy are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the choices made by elected bodies is that this stipulation has been incorporated – without public consent, and often in an atmosphere of total confidentiality – into trade treaties.

A Real-World Case: The Whitehaven Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The presiding officer ruled that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The Labour government then withdrew the licence the Tories had granted. Now, this success could be compromised by an secret arbitration panel answering to only the corporations bringing the case.

During August, a company whose final controllers reside in the tax haven lodged a claim challenging the UK government. Last week a dispute settlement body in the United States was set up to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had received permission to proceed. We have little idea how much this might be. Who is serving as its counsel in opposition to the British government? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The government makes a decision, the national judiciary upholds it, then a foreign company disputes it through an secretive private court, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case to date, but it seems likely that he may employ the arbitration process to fight the penalties the UK imposed on him after the invasion of Ukraine. He has filed a claim against a small nation on these grounds, claiming $16bn: half that state's yearly budget. Among the legal team on his side? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Growing Risks

Politicians promised that these scenarios were not possible. Previously, a senior politician, promoting the largest and riskiest of all investment pacts, told us: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this topic labelled critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “once firms start to realise the authority bestowed upon them, they will turn their attention from the weak nations to the strong ones” were met with scepticism.

That prediction has come to pass. This year, energy and mining firms have initiated a unprecedented number of cases against nations across the economic spectrum, opposing – as in the case of the UK mine – government attempts to prevent environmental catastrophe. Companies have so far won vast sums by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP