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How do you reckon our political system operates? It could be along the lines of this. We elect MPs. They vote on bills. Should a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that used to be how it operated in the past. Those days are over.

The Advent of Secret Courts

Nowadays, foreign corporations, or the oligarchs who own them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals allow no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even businesses operating from this country. They are open only to businesses based overseas.

If a tribunal determines that a legislative action might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These awards are based not on actual losses but funds the tribunal officials determine the company would perhaps have made. The administration may have to drop the legislation. It is hesitant to introducing similar legislation of a similar nature, due to the risk of being sued.

A System Running Rampant

Unprecedented levels of cases are being filed, as companies observe each other, and private equity finance suits for a share of a share of the settlements. The result? National sovereignty and popular rule are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the rulings enacted by parliaments is that this stipulation has been written – without democratic mandate, and typically amid a climate of extreme secrecy – into trade treaties.

A Specific Instance: The UK Coal Mine

Last year, a conservation group secured a significant win at the senior court. The presiding officer ruled that proposals to excavate the first deep coalmine in the UK for three decades, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have no impact on our carbon budgets. The Labour government later cancelled the licence the Tories had approved. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the entities filing the suit.

During August, a corporate entity whose final controllers are located in the tax haven initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had received permission to go ahead. Citizens have little idea how much this could amount to. What legal team is acting on its behalf against the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a foreign company disputes it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Challenge

Concurrently that the panel on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are scarce of the case to date, but it is highly possible that he will utilise the ISDS mechanism to contest the penalties the UK levied against him after the Russian aggression. He has previously started suing a small nation with similar intent, claiming a colossal sum: half that state's yearly budget. Included in the counsel on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states might be preventing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

The public was told that these events could not occur. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” An expert on this issue described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the authority bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were met with general mockery.

That threat has now materialised. Recently, fossil fuel and resource corporations have filed a unprecedented number of suits against nations both wealthy and developing, opposing – similar to the UK mine – government attempts to stop environmental catastrophe. Companies have to date won vast sums via ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP