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How do you understand our political system functions? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that used to be how it used to work. No longer.

The Rise of Secret Tribunals

Nowadays, foreign corporations, and the billionaires that control them, are able to litigate against governments for the policies they pass, at offshore tribunals composed of corporate lawyers. These proceedings take place away from public scrutiny. In contrast to domestic courts, these panels provide no opportunity to appeal or legal review. The general public cannot take a case to them, just as our government, or even businesses operating from this country. The door is open only to businesses registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s anticipated profits, it may order compensation of vast sums, potentially billions.

This compensation are based not on actual losses but compensation the arbitrators determine the company would perhaps have made. The administration may have to rescind the measure. It becomes deterred from introducing similar legislation of a similar nature, for fear of being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being brought, as companies take cues from each other, and investment funds finance suits in return for a cut of the takings. The consequence? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the decisions enacted by legislatures is that this provision has been inserted – absent public approval, and frequently under conditions of total confidentiality – inside bilateral investment treaties.

A Specific Case: The UK Coalmine

Twelve months ago, activists secured a significant win at the high court. The justice determined that plans to open the first major coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The Labour government subsequently revoked the permission the previous administration had approved. Now, this victory faces being overturned by an secret arbitration panel reporting to exclusively the companies bringing the case.

During August, a company whose final controllers reside in the offshore financial centre initiated proceedings versus the UK government. Last week a dispute settlement body in the United States was established to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. Which individual is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a overseas corporation disputes it through an secretive private court, and a elected official works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK enacted against him following the war in Ukraine. He has already started suing a small nation for this reason, seeking sixteen billion dollars: an amount representing half government’s yearly income. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

Legal experts contend that the EU’s delay in using frozen oligarchs' funds as collateral for its financial support package is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine urgently requires.

False Assurances and Mounting Risks

Politicians promised that these scenarios wouldn’t happen. In 2014, a senior politician, promoting the most significant and hazardous of all these agreements, declared: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An adviser on this matter accused critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms grasp the influence they’ve been granted, they will shift their focus from the weak nations to the developed economies” were met with general mockery.

That threat is now a reality. Recently, oil and gas and extraction companies have initiated a historic level of claims against nations rich and poor, contesting – similar to the Whitehaven project – official measures to halt climate breakdown. Corporations have so far won $114bn by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP