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How do you perceive our political system functions? Perhaps something like this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Emergence of Secret Courts

In the modern era, international firms, along with the oligarchs that control them, can sue elected administrations for the policies they pass, at secret arbitration panels made up of commercial attorneys. The cases take place behind closed doors. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, including businesses based in this country. Access is granted solely for corporations operating from foreign soil.

If a tribunal determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions, potentially billions.

These sums are based not on tangible damages but compensation the arbitrators conclude the company might otherwise have made. The state might be compelled to drop the legislation. It will be discouraged from introducing similar legislation in that area, due to the risk of facing litigation.

A System Growing Exponentially

Unprecedented levels of disputes are being filed, as corporations learn from each other, and hedge funds fund legal actions in return for a portion of the takings. The result? Sovereignty and popular rule are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices enacted by legislatures is that this provision has been inserted – without democratic mandate, and often in an atmosphere of total confidentiality – within international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the high court. The presiding officer ruled that schemes to excavate the first new deep coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have no consequence on climate commitments. The Labour government then withdrew the permission the former government had approved. Now, this victory could be compromised by an foreign court accountable to no one but the entities bringing the case.

In August, a corporate entity whose final controllers reside in the tax haven lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was set up to hear it.

The claimant is litigating against the UK for the money it would have generated if the mine had been permitted to commence operations. We have no clear indication how much this might be. What legal team is serving as its counsel in opposition to the UK administration? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a foreign company challenges it through an unaccountable arbitration panel, and a elected official represents its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coalmine case was appointed, it was revealed 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 may employ the arbitration process to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has started suing another European state on these grounds, seeking a colossal sum: an amount representing half government’s yearly income. Included in the legal team on his side? Cherie Blair, spouse of the previous PM.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Mounting Costs

The public was told that these events could not occur. In 2014, a government leader, championing the largest and riskiest of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has never been a issue in the past.” An adviser on this topic labelled critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That prediction has now materialised. Recently, fossil fuel and mining firms have lodged a unprecedented number of suits against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to halt environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP