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Can you reckon our political system works? Maybe along the lines of this. We elect MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that’s how it operated in the past. Those days are over.

The Advent of Secret Courts

Today, foreign corporations, along with the wealthy individuals behind them, have the power to sue nation states for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place in secret. In contrast to domestic courts, these bodies grant no right of appeal or legal review. The general public cannot take a case to them, just as our government, including enterprises operating from this country. Access is granted exclusively to businesses based overseas.

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

These awards are based not on tangible damages but funds the arbitrators decide the company could potentially have made. The government could be forced to drop the legislation. It becomes deterred from passing future laws along the same lines, worried about incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of disputes are being initiated, as firms take cues from each other, and private equity finance suits for a share of a portion of the takings. The outcome? Democratic sovereignty and democracy are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the rulings enacted by legislatures is that this provision has been incorporated – absent public approval, and typically amid conditions of total confidentiality – inside international trade agreements.

A Concrete Example: The Cumbrian Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that plans to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have no impact on our carbon budgets. The new government subsequently revoked the consent the Tories had approved. Today, this legal outcome could be compromised by an foreign court reporting to exclusively the corporations filing the suit.

Last August, a firm whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. Last week a arbitration panel in the US capital was set up to consider the case.

The claimant is litigating against the UK for the revenue it might have made if the mine had been permitted to go ahead. Citizens have no idea how much this could amount to. Who is representing it challenging the UK administration? A member of parliament, and ex-law officer in the outgoing administration, that great patriot the MP. The administration makes a decision, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case to date, but it seems likely that he will utilise the arbitration process to challenge the penalties the UK levied against him after the war in Ukraine. He has previously initiated proceedings against a small nation on these grounds, claiming $16bn: equivalent to half of state's yearly income. Part of the legal team on his side? Cherie Blair, wife of the former British prime minister.

International law scholars argue that the EU’s delay in using frozen state funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Mounting Threats

Politicians promised that these scenarios were not possible. Previously, a government leader, promoting the largest and riskiest of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this matter labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by these lawsuits. Warnings that “when companies start to realise the power they now possess, they will turn their attention from the poorer states to the developed economies” were met with widespread derision.

That threat has now materialised. In the current period, fossil fuel and resource corporations have lodged a record number of suits against nations rich and poor, contesting – like the example of the Whitehaven project – state efforts to prevent global warming. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP