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How do you understand our political system functions? Perhaps similar to this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. Legislation is upheld by the courts. Simple as that. Well, that was how it once functioned. No longer.

The Advent of Secret Courts

Nowadays, foreign corporations, or the oligarchs who own them, can sue nation states for the policies they pass, at offshore tribunals made up of corporate lawyers. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these tribunals grant no right of appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, including companies operating from this country. Access is granted exclusively to entities registered abroad.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

This compensation constitute not tangible damages but compensation the tribunal officials determine the company would perhaps have made. The state might be compelled to abandon its policy. It becomes discouraged from passing future laws of a similar nature, for fear of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms learn from each other, and investment funds finance suits for a share of a portion of the takings. The outcome? Democratic sovereignty and popular rule are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the choices enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and often in a climate of profound opacity – within trade treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, a conservation group secured a significant win at the High Court. The presiding officer determined that proposals to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have zero effect on climate commitments. The Labour government subsequently revoked the licence the former government had issued. Today, this success could be compromised by an offshore tribunal reporting to only the companies bringing the case.

In August, a corporate entity whose beneficial owners are based in the offshore financial centre lodged a claim challenging the UK government. The previous week a arbitration panel in Washington DC was set up to adjudicate on it.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to commence operations. We have no clear indication how much this might be. What legal team is acting on its behalf against the British government? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The administration makes a decision, the national judiciary upholds it, then a international entity contests it through an secretive private court, and a elected official acts on its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case at present, but it is highly possible that he will utilise the tribunal to contest the restrictions the UK levied against him subsequent to the Russian aggression. He has started suing another European state for this reason, seeking a colossal sum: half that nation's yearly budget. Part of the legal team on his side? Cherie Blair, wife of the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized oligarchs' funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Mounting Threats

We were assured that these scenarios were not possible. Previously, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An expert on this matter described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear these lawsuits. Warnings that “once firms start to realise the influence they’ve been granted, they will turn their attention from the poorer states to the developed economies” were greeted by widespread derision.

That threat is now a reality. In the current period, oil and gas and resource corporations have initiated a historic level of suits against nations across the economic spectrum, contesting – like the example of the Whitehaven project – official measures to stop global warming. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP