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How do you reckon our political system functions? Maybe along the lines of this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. Well, that’s how it once functioned. No longer.

The Emergence of Secret Courts

Nowadays, international firms, along with the wealthy individuals that control them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are held in secret. Unlike our courts, these panels grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including companies operating from this country. The door is open exclusively to entities registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions, even billions.

These awards constitute not tangible damages but funds the tribunal officials conclude the company might otherwise have made. The state might be compelled to abandon its policy. It becomes discouraged from passing future laws in that area, worried about incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of cases are being initiated, as firms observe each other, and investment funds fund legal actions in exchange for a cut of the takings. The consequence? Democratic sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the decisions made by elected bodies is that this stipulation has been incorporated – without public consent, and typically amid a climate of total confidentiality – inside bilateral investment treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer found that proposals to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had no consequence on national carbon targets. The new government later cancelled the licence the former government had issued. Currently, this victory is under threat by an foreign court answering to no one but the corporations bringing the case.

In August, a firm whose ultimate owners are located in the tax haven filed a lawsuit challenging the UK government. The previous week a arbitration panel in the United States was set up to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had received permission to go ahead. We have little idea how much this might be. Which individual is serving as its counsel in opposition to the British government? A sitting MP, and former attorney-general in the Conservative government, that great patriot the MP. The state makes a decision, the high court upholds it, then a international entity disputes it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows little of the case at present, but it appears probable that he will utilise the ISDS mechanism to challenge the penalties the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against a small nation with similar intent, seeking a colossal sum: equivalent to half of nation's yearly budget. Among the counsel representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over sovereign states may be obstructing the funds Ukraine critically depends on.

False Assurances and Escalating Costs

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a problem in the past.” An expert on this issue described activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “once firms start to realise the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has now materialised. This year, energy and extraction companies have initiated a historic level of suits against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP