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What is your understand our political system works? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills pass into law. Legislation is upheld by the courts. Simple as that. However, that used to be how it once functioned. No longer.

The Rise of Secret Tribunals

In the modern era, international firms, or the oligarchs that control them, can sue nation states for the regulations they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even businesses headquartered in this country. They are open exclusively to corporations operating from foreign soil.

If a tribunal finds that a law or policy might diminish the corporation’s projected profits, it may order damages of hundreds of millions, running into billions.

This compensation are based not on tangible damages but money the tribunal officials decide the company would perhaps have made. The administration could be forced to drop the legislation. It will be hesitant to enacting future policies along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being initiated, as firms learn from each other, and hedge funds finance suits in return for a portion of the settlements. The outcome? Sovereignty and democracy are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the rulings made by elected bodies is that this provision has been incorporated – without democratic mandate, and often in a climate of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The Cumbrian Coalmine

A year ago, activists won a great victory at the High Court. The judge ruled that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have had no consequence on climate commitments. The new government subsequently revoked the permission the previous administration had granted. Currently, this success faces being overturned by an offshore tribunal answering to only the companies bringing the case.

During August, a company whose beneficial owners reside in the tax haven lodged a claim versus the UK government. Last week a tribunal in the US capital was established to hear it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. We have no clear indication how much this could amount to. Who is representing it in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the domestic court validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a elected official works for its behalf.

A Sanctions Case

Simultaneously that the panel on the coal mine dispute was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are little of the case so far, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK imposed on him following the war in Ukraine. He has filed a claim against a small nation with similar intent, seeking $16bn: an amount representing half state's yearly budget. Part of the counsel representing him there? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s delay in utilising seized state funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over elected governments might be preventing the finance Ukraine desperately needs.

Misleading Claims and Mounting Risks

The public was told that these events could not occur. In 2014, a former prime minister, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this issue labelled campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “as corporations grasp the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That threat has now materialised. In the current period, fossil fuel and extraction companies have lodged a historic level of claims against nations across the economic spectrum, opposing – as in the case of the UK mine – state efforts to prevent global warming. Companies have thus far won vast sums through ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP