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Can you perceive our political system operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. However, that’s how it used to work. Those days are over.

The Rise of Secret Courts

Today, overseas companies, along with the billionaires behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted behind closed doors. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal finds that a government measure might diminish the corporation’s projected profits, it may order damages of hundreds of millions, even billions.

This compensation constitute not actual losses but compensation the tribunal officials determine the company would perhaps have made. The state could be forced to abandon its policy. It becomes discouraged from introducing similar legislation along the same lines, due to the risk of facing litigation.

A System Running Rampant

Unprecedented levels of cases are being brought, as companies take cues from each other, and private equity bankroll lawsuits in return for a portion of the settlements. The result? National sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the rulings enacted by parliaments is that this clause has been written – absent public approval, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The judge determined that schemes to excavate the first deep coalmine in the UK for 30 years, in northwest England, were wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have no consequence on our carbon budgets. The Labour government later cancelled the permission the former government had granted. Now, this victory faces being overturned by an foreign court answering to only the corporations bringing the case.

Last August, a corporate entity whose beneficial owners are based in the tax haven lodged a claim challenging the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. Citizens have no idea how much this could amount to. What legal team is representing it in opposition to the state? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The administration enacts a policy, the domestic court supports it, then a foreign company disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Case

Concurrently that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case so far, but it seems likely that he will utilise the arbitration process to fight the sanctions the UK imposed on him following the Russian aggression. He has initiated proceedings against Luxembourg with similar intent, demanding a colossal sum: an amount representing half nation's annual revenue. Part of the counsel acting for him in that case? Cherie Blair, spouse of the previous PM.

Legal experts contend that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Costs

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” A consultant on this topic accused activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms start to realise the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were greeted by widespread derision.

That warning is now a reality. This year, energy and mining firms have lodged a unprecedented number of suits against nations rich and poor, contesting – similar to the Whitehaven project – state efforts to halt environmental catastrophe. Corporations have so far won vast sums via ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP