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How do you understand our political system functions? It could be similar to this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. That's it. Yet, that was how it used to work. No longer.

The Advent of Secret Tribunals

Nowadays, foreign corporations, along with the billionaires behind them, have the power to sue nation states for the policies they pass, at private courts made up of corporate lawyers. The cases take place behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even companies based in this country. The door is open only to corporations registered abroad.

If a tribunal finds that a law or policy might diminish the corporation’s expected profits, it has the power to grant damages of vast sums, running into billions.

These sums are based not on tangible damages but funds the panel members determine the company might otherwise have made. The state might be compelled to rescind the measure. It will be hesitant to enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and investment funds fund legal actions in return for a share of the takings. The consequence? Democratic sovereignty and popular rule are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the decisions enacted by parliaments is that this stipulation has been inserted – without public consent, and frequently under an atmosphere of profound opacity – into international trade agreements.

A Real-World Case: The UK Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The judge found that schemes to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine could have no impact on climate commitments. The new government then withdrew the licence the previous administration had granted. Now, this success could be compromised by an offshore tribunal reporting to exclusively the companies petitioning it.

During August, a corporate entity whose final controllers are based in the tax haven lodged a claim versus the UK government. Last week a arbitration panel in the United States was convened to hear it.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had been allowed to proceed. Citizens have no clear indication how much this could amount to. Who is representing it in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a overseas corporation disputes it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Case

On the same day that the court on the mining lawsuit was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are little of the case to date, but it seems likely that he’ll use the ISDS mechanism to fight the penalties the UK levied against him following the Russian aggression. He has previously initiated proceedings against Luxembourg for this reason, claiming $16bn: equivalent to half of nation's yearly budget. Included in the counsel representing him there? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in utilising seized Russian assets as collateral for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over sovereign states might be preventing the funds Ukraine desperately needs.

Misleading Claims and Growing Costs

We were assured that these scenarios wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An adviser on this matter described activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms grasp the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were met with general mockery.

That threat has come to pass. This year, fossil fuel and mining firms have initiated a record number of claims against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP