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How do you reckon our political system works? Maybe something like this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. The law is upheld by the courts. Simple as that. However, that’s how it once functioned. Those days are over.

The Advent of Secret Courts

Today, overseas companies, or the billionaires that control them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these panels allow no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even enterprises operating from this country. Access is granted exclusively to businesses operating from foreign soil.

If a tribunal finds that a government measure might diminish the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These sums are based not on tangible damages but money the tribunal officials conclude the company would perhaps have made. The administration may have to drop the legislation. It becomes hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A System Growing Exponentially

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and investment funds bankroll lawsuits in return for a cut of the awards. The consequence? National sovereignty and popular rule are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the rulings made by parliaments is that this stipulation has been incorporated – absent public approval, and frequently under a climate of total confidentiality – into international trade agreements.

A Specific Instance: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the high court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The new government later cancelled the consent the Tories had granted. Now, this victory faces being overturned by an foreign court reporting to only the entities filing the suit.

In August, a corporate entity whose beneficial owners reside in the offshore financial centre filed a lawsuit against the UK government. Last week a dispute settlement body in the US capital was established to adjudicate on it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. We have little idea how much this might be. Who is acting on its behalf against the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Challenge

Simultaneously that the court on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it seems likely that he may employ the arbitration process to fight the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against a small nation for this reason, demanding sixteen billion dollars: equivalent to half of state's yearly budget. Part of the lawyers on his side? Cherie Blair, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

Misleading Claims and Escalating Costs

The public was told that these events wouldn’t happen. Years ago, a senior politician, championing the largest and riskiest of all investment pacts, stated: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this matter accused critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations begin to understand the power they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That prediction has now materialised. In the current period, fossil fuel and resource corporations have initiated a record number of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Companies have to date won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP