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How do you perceive our political system works? Maybe something like this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Advent of Secret Courts

In the modern era, foreign corporations, and the oligarchs who own them, are able to litigate against governments for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are held in secret. Differing from national judiciaries, these bodies allow no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, or even businesses based in this country. Access is granted exclusively to corporations registered abroad.

Should an arbitration panel rules that a law or policy may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

This compensation represent not actual losses but money the panel members conclude the company might otherwise have made. The administration could be forced to drop the legislation. It is deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of disputes are being filed, as companies take cues from each other, and investment funds fund legal actions in return for a portion of the awards. The result? National sovereignty and democratic governance are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the rulings taken by legislatures is that this clause has been incorporated – absent public approval, and often in a climate of profound opacity – inside trade treaties.

A Real-World Case: The Whitehaven Coalmine

Last year, a conservation group secured a significant win at the senior court. The justice found that schemes to excavate the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine could have no impact on our carbon budgets. The incoming administration subsequently revoked the licence the former government had granted. Now, this victory faces being overturned by an secret arbitration panel reporting to no one but the corporations bringing the case.

Last August, a firm whose ultimate owners are based in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in Washington DC was set up to hear it.

The company is suing the UK for the money it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this could amount to. What legal team is representing it in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the domestic court validates it, then a international entity contests it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Challenge

On the same day that the court on the coal mine dispute was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK imposed on him following the war in Ukraine. He has filed a claim against Luxembourg for this reason, demanding $16bn: equivalent to half of state's annual revenue. Included in the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists contend that the EU’s delay in using frozen Russian assets as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over sovereign states may be obstructing the funds Ukraine critically depends on.

Empty Promises and Growing Costs

Politicians promised that these scenarios wouldn’t happen. Previously, a government leader, advocating for the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” A consultant on this topic described critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms grasp the power they now possess, they will turn their attention from the poorer states to the wealthy nations” were met with widespread derision.

That warning has now materialised. In the current period, oil and gas and extraction companies have filed a unprecedented number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – government attempts to stop climate breakdown. Corporations have thus far won vast sums through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP