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Can you reckon our political system operates? Perhaps something like this. We elect MPs. They legislate on bills. When a majority is achieved, the bills pass into law. Statutes is maintained by the courts. End of story. However, that used to be how it operated in the past. Not anymore.

The Rise of Secret Courts

Nowadays, overseas companies, or the oligarchs behind them, can sue nation states for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes take place in secret. Differing from national judiciaries, these bodies grant no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for businesses registered abroad.

If a tribunal determines that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions, even billions.

These awards represent not tangible damages but money the arbitrators decide the company would perhaps have made. The administration may have to rescind the measure. It becomes discouraged from passing future laws along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of legal actions are being brought, as companies learn from each other, and private equity bankroll lawsuits in exchange for a share of the settlements. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices taken by legislatures is that this provision has been written – without public consent, and often in an atmosphere of profound opacity – inside trade treaties.

A Concrete Example: The UK Coalmine

Last year, a conservation group achieved a major legal triumph at the senior court. The justice determined that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the licence the previous administration had issued. Currently, this success could be compromised by an offshore tribunal reporting to exclusively the corporations petitioning it.

Last August, a firm whose beneficial owners are located in the offshore financial centre filed a lawsuit against the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. The public has no idea how much this could amount to. Who is serving as its counsel challenging the UK administration? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The state enacts a policy, the domestic court upholds it, then a foreign company challenges it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case to date, but it seems likely that he’ll use the ISDS mechanism to challenge the penalties the UK enacted against him after the Russian aggression. He has previously initiated proceedings against another European state on these grounds, seeking a colossal sum: half that government’s annual revenue. Part of the lawyers on his side? a prominent lawyer, spouse of the ex-UK leader.

Legal experts believe that the EU’s procrastination in using frozen state funds as collateral for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

False Assurances and Mounting Risks

The public was told that such things were not possible. Years ago, a government leader, advocating for the largest and riskiest of all investment pacts, told us: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this topic described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “when companies grasp the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were met with scepticism.

That threat is now a reality. Recently, fossil fuel and resource corporations have filed a unprecedented number of suits against nations rich and poor, contesting – like the example of the Cumbrian coalmine – government attempts to halt global warming. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP