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How do you reckon our political system works? Maybe something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. That's it. Yet, that used to be how it once functioned. Not anymore.

The Emergence of Secret Courts

In the modern era, international firms, along with the wealthy individuals behind them, can sue governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. These proceedings take place in secret. Unlike our courts, these tribunals provide no avenue for appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even companies headquartered in this country. Access is granted solely for entities registered abroad.

If a tribunal determines that a legislative action might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These awards constitute not real financial harm but compensation the panel members decide the company would perhaps have made. The state might be compelled to abandon its policy. It becomes deterred from passing future laws in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of legal actions are being initiated, as firms take cues from each other, and hedge funds fund legal actions in exchange for a portion of the awards. The result? National sovereignty and democracy are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the choices enacted by elected bodies is that this stipulation has been inserted – without public consent, and often in an atmosphere of total confidentiality – inside international trade agreements.

A Specific Example: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The judge determined that schemes to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have had no impact on national carbon targets. The incoming administration subsequently revoked the consent the former government had granted. Now, this legal outcome is under threat by an offshore tribunal answering to no one but the entities petitioning it.

In August, a firm whose ultimate owners are based in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in the United States was established to adjudicate on it.

The company is litigating against the UK for the profits it would have generated if the mine had been permitted to commence operations. Citizens have no clear indication how much this sum represents. Which individual is serving as its counsel against the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case at present, but it seems likely that he’ll use the tribunal to contest the restrictions the UK enacted against him following the Russian aggression. He has filed a claim against another European state for this reason, claiming $16bn: equivalent to half of nation's annual revenue. Included in the counsel representing him there? the wife of a former prime minister, married to the previous PM.

Trade specialists contend that the EU’s procrastination in using frozen Russian assets as security for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states could be blocking the funds Ukraine desperately needs.

Empty Promises and Mounting Threats

Politicians promised that such things could not occur. Previously, a senior politician, advocating for the most significant and hazardous of all these agreements, stated: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this topic accused campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about such legal actions. Predictions that “when companies grasp the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with scepticism.

That prediction has come to pass. In the current period, fossil fuel and mining firms have lodged a record number of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP