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What is your perceive our political system functions? It could be similar to this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills pass into law. The law is upheld by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Emergence of Secret Tribunals

Today, foreign corporations, or the wealthy individuals who own them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted in secret. Differing from national judiciaries, these tribunals provide no right of appeal or legal review. The general public cannot take a case to them, nor can our government, or even enterprises based in this country. The door is open exclusively to entities registered abroad.

When a secret court finds that a legislative action may compromise the corporation’s expected profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but funds the panel members conclude the company might otherwise have made. The government might be compelled to abandon its policy. It is deterred from passing future laws along the same lines, for fear of being sued.

A Process Growing Exponentially

Unprecedented levels of cases are being initiated, as firms learn from each other, and private equity bankroll lawsuits for a share of a share of the settlements. The result? Democratic sovereignty and democracy are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the choices enacted by legislatures is that this stipulation has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Real-World Example: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The justice found that plans to dig the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The incoming administration subsequently revoked the consent the previous administration had approved. Currently, this victory faces being overturned by an secret arbitration panel answering to only the entities filing the suit.

During August, a corporate entity whose ultimate owners are based in the offshore financial centre lodged a claim challenging the UK government. Recently a tribunal in Washington DC was convened to consider the case.

The company 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 could amount to. What legal team is serving as its counsel challenging the British government? An elected representative, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration passes a law, the national judiciary upholds it, then a foreign company disputes it through an secretive private court, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case to date, but it is highly possible that he’ll use the ISDS mechanism to fight the sanctions the UK levied against him after the Russian aggression. He has filed a claim against Luxembourg with similar intent, claiming a colossal sum: half that government’s yearly income. Included in the counsel representing him there? Cherie Blair, wife of the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized state funds as security for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine desperately needs.

Misleading Claims and Escalating Costs

Politicians promised that such things could not occur. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” A consultant on this matter accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Warnings that “as corporations begin to understand the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were met with general mockery.

That warning is now a reality. In the current period, oil and gas and extraction companies have filed a historic level of suits against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – state efforts to halt global warming. Corporations have so far won vast sums via ISDS, of which oil majors have obtained $84bn. That represents the combined GDP