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Can you perceive our political system functions? It could be along the lines of this. We elect MPs. They legislate on bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Rise of Secret Tribunals

In the modern era, foreign corporations, along with the wealthy individuals that control them, have the power to sue governments for the laws they pass, at private courts staffed by business advocates. The cases are held in secret. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. You or I cannot take a case to them, nor can our government, or even enterprises headquartered in this country. They are open solely for entities based overseas.

When a secret court rules that a law or policy may compromise the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but compensation the arbitrators conclude the company could potentially have made. The state might be compelled to abandon its policy. It is deterred from passing future laws in that area, for fear of incurring a lawsuit.

A System Growing Exponentially

Record numbers of legal actions are being filed, as firms take cues from each other, and private equity fund legal actions in exchange for a share of the awards. The result? Sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the rulings made by legislatures is that this clause has been inserted – absent public approval, and frequently under a climate of total confidentiality – within bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the high court. The judge found that proposals to dig the first major coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have no impact on national carbon targets. The Labour government then withdrew the permission the former government had issued. Currently, this victory faces being overturned by an offshore tribunal answering to only the entities petitioning it.

During August, a corporate entity whose beneficial owners are based in the Cayman Islands initiated proceedings against the UK government. Recently a dispute settlement body in the US capital was set up to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. The public has no idea how much this could amount to. Who is serving as its counsel challenging the state? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the high court supports it, then a foreign company challenges it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the sanctions the UK enacted against him subsequent to the Russian aggression. He has previously filed a claim against another European state for this reason, demanding a colossal sum: half that state's yearly income. Part of the lawyers acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in utilising seized state funds as security for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over democratic administrations could be blocking the funds Ukraine critically depends on.

Misleading Claims and Escalating Costs

Politicians promised that these events could not occur. In 2014, a former prime minister, championing the biggest and most dangerous of all these agreements, told us: “The UK has signed trade agreement after trade deal and there has never been a case in the past.” An expert on this issue accused critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations had to worry about such legal actions. Predictions that “as corporations begin to understand the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were greeted by general mockery.

That threat has now materialised. Recently, energy and resource corporations have filed a unprecedented number of claims against nations rich and poor, opposing – like the example of the UK mine – official measures to stop global warming. Companies have thus far won vast sums by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP