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How do you perceive our political system operates? Perhaps something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. Yet, that used to be how it used to work. Not anymore.

The Emergence of Secret Courts

In the modern era, foreign corporations, along with the wealthy individuals that control them, have the power to sue governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these tribunals grant no opportunity to appeal or legal review. You or I are unable to file a case to them, nor can our government, or even companies operating from this country. Access is granted solely for corporations based overseas.

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

This compensation constitute not real financial harm but compensation the tribunal officials decide the company could potentially have made. The administration may have to drop the legislation. It becomes discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of disputes are being brought, as firms take cues from each other, and investment funds finance suits for a share of a share of the awards. The consequence? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the decisions enacted by parliaments is that this stipulation has been written – without public consent, and frequently under a climate of total confidentiality – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The judge ruled that plans to open the first new deep coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the consent the Tories had approved. Currently, this legal outcome faces being overturned by an foreign court reporting to exclusively the companies bringing the case.

In August, a corporate entity whose ultimate owners are located in the tax haven initiated proceedings against the UK government. The previous week a tribunal in the US capital was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. We have little idea how much this could amount to. Who is representing it against the state? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot the MP. The government makes a decision, the national judiciary upholds it, then a international entity contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

The Russian Case

Concurrently that the tribunal on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he may employ the ISDS mechanism to fight the sanctions the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, seeking a colossal sum: half that nation's yearly budget. Included in the counsel representing him there? Cherie Blair, spouse of the previous PM.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over democratic administrations could be blocking the money Ukraine urgently requires.

False Assurances and Mounting Threats

The public was told that these scenarios wouldn’t happen. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, stated: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An expert on this topic accused campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear such legal actions. Warnings that “once firms begin to understand the power they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That warning is now a reality. In the current period, fossil fuel and extraction companies have filed a record number of cases against nations rich and poor, contesting – similar to the Whitehaven project – government attempts to prevent environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP