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How do you reckon our political system functions? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. End of story. However, that was how it once functioned. No longer.

The Rise of Secret Tribunals

In the modern era, international firms, or the billionaires behind them, have the power to sue elected administrations for the laws they pass, at private courts composed of corporate lawyers. These proceedings are held behind closed doors. In contrast to domestic courts, these bodies provide no right of appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even companies operating from this country. The door is open only to businesses based overseas.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it has the power to grant compensation of vast sums, potentially billions.

These sums represent not real financial harm but money the arbitrators determine the company could potentially have made. The administration could be forced to rescind the measure. It is discouraged from enacting future policies along the same lines, for fear of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of disputes are being brought, as companies take cues from each other, and private equity fund legal actions in exchange for a portion of the takings. The outcome? National sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the choices taken by elected bodies is that this provision has been inserted – absent public approval, and frequently under conditions of extreme secrecy – within international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the high court. The presiding officer ruled that schemes to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no impact on national carbon targets. The new government subsequently revoked the licence the Tories had issued. Today, this victory is under threat by an offshore tribunal answering to no one but the corporations bringing the case.

During August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the US capital was established to adjudicate on it.

The company is litigating against the UK for the money it would have generated if the mine had received permission to proceed. The public has no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court validates it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case so far, but it seems likely that he’ll use the ISDS mechanism to fight the penalties the UK enacted against him following the war in Ukraine. He has filed a claim against Luxembourg on these grounds, claiming a colossal sum: equivalent to half of government’s yearly income. Part of the counsel acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Legal experts believe that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Risks

We were assured that such things wouldn’t happen. Previously, a senior politician, championing the largest and riskiest of all these agreements, told us: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” An adviser on this issue accused critics of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Predictions that “as corporations grasp the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were dismissed with widespread derision.

That prediction is now a reality. In the current period, energy and extraction companies have lodged a unprecedented number of cases against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP