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How do you perceive our political system functions? Perhaps along the lines of this. We elect MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. However, that’s how it used to work. No longer.

The Emergence of Secret Tribunals

In the modern era, foreign corporations, along with the oligarchs who own them, have the power to sue nation states for the policies they pass, at secret arbitration panels made up of commercial attorneys. These proceedings take place behind closed doors. In contrast to domestic courts, these tribunals allow no avenue for appeal or legal review. You or I are unable to file a case to them, nor can our government, including companies headquartered in this country. They are open only to entities based overseas.

Should an arbitration panel determines that a legislative action may compromise the corporation’s projected profits, it may order damages of vast sums, even billions.

These sums are based not on tangible damages but money the arbitrators decide the company might otherwise have made. The administration could be forced to abandon its policy. It will be discouraged from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as corporations take cues from each other, and investment funds finance suits in return for a share of the settlements. The consequence? National sovereignty and popular rule are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the rulings taken by elected bodies is that this clause has been written – absent public approval, and typically amid an atmosphere of total confidentiality – into international trade agreements.

A Concrete Case: The UK Coalmine

Last year, a conservation group secured a significant win at the High Court. The judge determined that schemes to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have zero effect on national carbon targets. The new government then withdrew the permission the former government had granted. Currently, this success could be compromised by an foreign court accountable to exclusively the companies filing the suit.

In August, a company whose final controllers are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in Washington DC was established to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had received permission to proceed. The public has no idea how much this sum represents. Who is acting on its behalf against the state? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The state makes a decision, the domestic court supports it, then a foreign company contests it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Case

Concurrently that the tribunal on the coal mine dispute was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he’ll use the arbitration process to challenge the sanctions the UK levied against him after the war in Ukraine. He has already filed a claim against another European state for this reason, demanding $16bn: half that government’s yearly budget. Part of the legal team on his side? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen Russian assets as collateral for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Costs

Politicians promised that these scenarios could not occur. In 2014, a government leader, advocating for the most significant and hazardous of all such treaties, stated: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this topic labelled activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “once firms grasp the power they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with general mockery.

That prediction has come to pass. In the current period, fossil fuel and resource corporations have filed a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – government attempts to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP