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How do you perceive our political system operates? Maybe along the lines of this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. End of story. Well, that’s how it operated in the past. Not anymore.

The Advent of Secret Tribunals

Nowadays, international firms, or the billionaires who own them, can sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these panels allow no right of appeal or legal review. 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 corporations registered abroad.

Should an arbitration panel determines that a legislative action could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but funds the tribunal officials decide the company would perhaps have made. The administration may have to rescind the measure. It is deterred from passing future laws of a similar nature, worried about being sued.

A System Spiralling Out of Control

Record numbers of legal actions are being brought, as firms learn from each other, and investment funds bankroll lawsuits for a share of a share of the settlements. The outcome? National sovereignty and popular rule are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the decisions taken by legislatures is that this provision has been incorporated – without democratic mandate, and frequently under conditions of profound opacity – inside trade treaties.

A Concrete Example: The UK Coalmine

Last year, activists secured a significant win at the High Court. The judge found that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no impact on national carbon targets. The new government then withdrew the permission the previous administration had approved. Currently, this legal outcome is under threat by an secret arbitration panel reporting to exclusively the companies petitioning it.

During August, a company whose ultimate owners are based in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in the US capital was convened to adjudicate on it.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The state makes a decision, the high court validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it seems likely that he may employ the tribunal to fight the penalties the UK enacted against him following the war in Ukraine. He has started suing Luxembourg with similar intent, seeking a colossal sum: half that nation's yearly income. Part of the lawyers on his side? the wife of a former prime minister, married to the ex-UK leader.

International law scholars argue that the EU’s hesitation in leveraging immobilised state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Escalating Costs

Politicians promised that these events wouldn’t happen. In 2014, a senior politician, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade deal upon trade deal and we have never seen a problem in the past.” An expert on this topic accused critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about such legal actions. Warnings that “once firms grasp the influence they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.

That threat has come to pass. In the current period, energy and resource corporations have initiated a record number of claims against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP