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How do you understand our political system operates? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. Statutes are enforced by the courts. End of story. Well, that’s how it once functioned. No longer.

The Rise of Secret Arbitration Panels

Nowadays, overseas companies, and the wealthy individuals that control them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are held behind closed doors. Unlike our courts, these tribunals provide no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even companies based in this country. The door is open only to businesses operating from foreign soil.

When a secret court determines that a legislative action might diminish the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, even billions.

These awards constitute not tangible damages but money the arbitrators determine the company would perhaps have made. The administration may have to abandon its policy. It is discouraged from passing future laws in that area, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of cases are being filed, as firms observe each other, and hedge funds finance suits for a share of a share of the takings. The outcome? Democratic sovereignty and democracy are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings enacted by legislatures is that this provision has been written – without democratic mandate, and typically amid an atmosphere of total confidentiality – into trade treaties.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The presiding officer found that schemes to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the questionable argument that the mine could have zero effect on climate commitments. The Labour government then withdrew the permission the Tories had granted. Now, this victory could be compromised by an foreign court answering to exclusively the companies bringing the case.

In August, a corporate entity whose beneficial owners are based in the tax haven filed a lawsuit against the UK government. Last week a tribunal in the US capital was set up to consider the case.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have no idea how much this sum represents. Which individual is acting on its behalf challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court supports it, then a overseas corporation contests it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Case

Concurrently that the court on the coalmine case was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know scarce of the case so far, but it appears probable that he’ll use the ISDS mechanism to fight the penalties the UK enacted against him after the Russian aggression. He has previously initiated proceedings against another European state with similar intent, claiming sixteen billion dollars: an amount representing half state's annual revenue. Included in the counsel representing him there? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists contend that the EU’s delay in using frozen oligarchs' funds as collateral for its aid for Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over sovereign states may be obstructing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

Politicians promised that such things were not possible. Years ago, a government leader, advocating for the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this matter labelled campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations should be concerned by such legal actions. Warnings that “when companies start to realise the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by scepticism.

That threat is now a reality. In the current period, fossil fuel and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, opposing – similar to the UK mine – government attempts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP