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How do you reckon our system of government works? It could be similar to this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. However, that’s how it once functioned. Not anymore.

The Rise of Secret Tribunals

Today, international firms, along with the wealthy individuals behind them, are able to litigate against elected administrations for the laws they pass, at private courts composed of business advocates. Such disputes are conducted behind closed doors. In contrast to domestic courts, these tribunals grant no opportunity to appeal or oversight by judges. The general public cannot take a case to them, just as our government, or even companies headquartered in this country. The door is open solely for businesses operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions, running into billions.

These awards constitute not real financial harm but compensation the arbitrators conclude the company would perhaps have made. The administration may have to drop the legislation. It becomes discouraged from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of disputes are being initiated, as companies take cues from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The consequence? National sovereignty and popular rule are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the decisions taken by legislatures is that this stipulation has been written – absent public approval, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The justice found that proposals to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The Labour government subsequently revoked the licence the Tories had issued. Today, this legal outcome is under threat by an foreign court accountable to no one but the corporations petitioning it.

During August, a company whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging the UK government. Last week a tribunal in the United States was convened to hear it.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to commence operations. Citizens have little idea how much this could amount to. What legal team is serving as its counsel against the state? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the high court supports it, then a international entity contests it through an undemocratic private court, and a sitting MP works for its behalf.

An Oligarch's Case

On the same day that the panel on the coal mine dispute was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has previously initiated proceedings against Luxembourg for this reason, demanding a colossal sum: equivalent to half of state's annual revenue. Among the legal team on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen state funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.

Empty Promises and Mounting Costs

Politicians promised that these events could not occur. In 2014, a senior politician, championing the largest and riskiest of all such treaties, stated: “Britain has agreed to trade agreement upon trade deal and there has never been a case in the past.” A consultant on this issue accused critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were dismissed with scepticism.

That threat has come to pass. In the current period, fossil fuel and resource corporations have initiated a unprecedented number of claims against nations both wealthy and developing, contesting – as in the case of the UK mine – state efforts to stop environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP