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Can you understand our political system functions? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. End of story. However, that was how it used to work. Those days are over.

The Emergence of Secret Courts

In the modern era, international firms, along with the wealthy individuals behind them, can sue nation states for the laws they pass, at private courts composed of commercial attorneys. The cases take place behind closed doors. Unlike our courts, these bodies grant no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises based in this country. They are open only to entities operating from foreign soil.

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

This compensation represent not actual losses but funds the arbitrators determine the company could potentially have made. The administration may have to abandon its policy. It becomes hesitant to enacting future policies in that area, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as corporations learn from each other, and private equity finance suits in return for a share of the takings. The outcome? National sovereignty and democratic governance are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the rulings made by parliaments is that this provision has been incorporated – without public consent, and often in an atmosphere of extreme secrecy – inside international trade agreements.

A Real-World Example: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the high court. The judge determined that schemes to open the first deep coalmine in the UK for 30 years, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have zero effect on national carbon targets. The incoming administration later cancelled the licence the former government had granted. Currently, this success could be compromised by an secret arbitration panel accountable to exclusively the companies petitioning it.

Last August, a firm whose beneficial owners reside in the tax haven initiated proceedings versus the UK government. Last week a arbitration panel in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has no idea how much this might be. Who is acting on its behalf against the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation disputes it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coal mine dispute was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it seems likely that he will utilise the tribunal to challenge the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has previously started suing another European state for this reason, demanding $16bn: equivalent to half of nation's annual revenue. Included in the counsel acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Trade specialists argue that the EU’s delay in using frozen state funds as security for its financial support package is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments may be obstructing the funds Ukraine critically depends on.

Empty Promises and Escalating Risks

We were assured that such things could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has never been a case in the past.” An expert on this matter described campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were met with scepticism.

That threat is now a reality. In the current period, fossil fuel and resource corporations have initiated a historic level of claims against nations rich and poor, contesting – similar to the Whitehaven project – government attempts to stop environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP