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How do you understand our political system functions? It could be along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills pass into law. Statutes are enforced by the courts. End of story. Yet, that used to be how it once functioned. Those days are over.

The Advent of Secret Courts

In the modern era, international firms, along with the oligarchs that control them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are held in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, including enterprises headquartered in this country. They are open exclusively to entities based overseas.

When a secret court determines that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, running into billions.

These sums constitute not tangible damages but money the tribunal officials determine the company could potentially have made. The administration may have to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of legal actions are being initiated, as corporations learn from each other, and private equity fund legal actions in return for a portion of the awards. The outcome? Democratic sovereignty and democratic governance are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions made by parliaments is that this stipulation has been written – absent public approval, and typically amid an atmosphere of total confidentiality – within trade treaties.

A Concrete Instance: The UK Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The justice ruled that proposals to excavate the first deep coalmine in the UK for three decades, in Cumbria, were unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have no impact on climate commitments. The Labour government subsequently revoked the licence the previous administration had approved. Today, this success faces being overturned by an foreign court answering to only the entities petitioning it.

In August, a corporate entity whose beneficial owners reside in the tax haven initiated proceedings against the UK government. Last week a dispute settlement body in the United States was set up to consider the case.

This firm is seeking compensation from the UK for the profits it might have made if the mine had received permission to proceed. Citizens have no idea how much this might be. Who is serving as its counsel against the state? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court supports it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the mining lawsuit was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know little of the case so far, but it appears probable that he may employ the tribunal to contest the restrictions the UK imposed on him subsequent to the Russian aggression. He has already started suing Luxembourg for this reason, demanding sixteen billion dollars: an amount representing half state's yearly budget. Part of the counsel acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

International law scholars argue that the EU’s hesitation in utilising seized state funds as security for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states may be obstructing the funds Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that such things were not possible. In 2014, a senior politician, advocating for the most significant and hazardous of all investment pacts, stated: “We’ve signed trade deal upon trade deal and we have never seen a case in the past.” An expert on this matter accused critics of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about ISDS claims. Warnings that “when companies begin to understand the authority they now possess, they will shift their focus from the poorer states to the strong ones” were met with widespread derision.

That threat has now materialised. This year, fossil fuel and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – state efforts to halt global warming. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained the majority. That represents the combined GDP