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What is your reckon our political system operates? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law is maintained by the courts. End of story. Well, that was how it operated in the past. Those days are over.

The Emergence of Secret Courts

Today, foreign corporations, or the wealthy individuals behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels made up of business advocates. The cases are held behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even companies operating from this country. The door is open solely for businesses registered abroad.

If a tribunal rules that a law or policy may compromise the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

This compensation represent not tangible damages but money the arbitrators conclude the company might otherwise have made. The state may have to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being brought, as firms take cues from each other, and hedge funds bankroll lawsuits for a share of a share of the takings. The outcome? Sovereignty and democracy are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the rulings enacted by elected bodies is that this stipulation has been written – absent public approval, and often in a climate of profound opacity – within international trade agreements.

A Specific Case: The Whitehaven Coal Mine

A year ago, activists won a great victory at the high court. The presiding officer determined that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, had been unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on climate commitments. The Labour government then withdrew the consent the former government had granted. Currently, this legal outcome is under threat by an secret arbitration panel answering to no one but the corporations bringing the case.

During August, a company whose beneficial owners reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a tribunal in the US capital was established to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a international entity contests it through an secretive private court, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the coalmine case was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the sanctions the UK levied against him after the war in Ukraine. He has previously started suing another European state on these grounds, demanding sixteen billion dollars: an amount representing half state's annual revenue. Part of the legal team acting for him in that case? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as security for its financial support package is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Threats

Politicians promised that these scenarios were not possible. Years ago, a senior politician, advocating for the largest and riskiest of all investment pacts, told us: “Britain has agreed to trade agreement upon trade deal and we have never seen a problem in the past.” A consultant on this matter labelled campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by ISDS claims. Predictions that “when companies begin to understand the authority bestowed upon them, they will turn their attention from the weak nations to the developed economies” were met with general mockery.

That threat has now materialised. Recently, oil and gas and resource corporations have filed a record number of claims against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to halt climate breakdown. Corporations have thus far won vast sums through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP