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How do you understand our political system works? Perhaps something like this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that’s how it once functioned. Those days are over.

The Advent of Secret Courts

Today, international firms, or the wealthy individuals that control them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of commercial attorneys. These proceedings take place behind closed doors. Differing from national judiciaries, these tribunals grant no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises operating from this country. They are open exclusively to businesses operating from foreign soil.

When a secret court rules that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions, even billions.

These sums constitute not real financial harm but funds the tribunal officials conclude the company could potentially have made. The government could be forced to abandon its policy. It will be hesitant to passing future laws of a similar nature, worried about facing litigation.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as companies observe each other, and private equity fund legal actions for a share of a portion of the settlements. The consequence? National sovereignty and democracy are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the choices made by legislatures is that this clause has been incorporated – without public consent, and often in conditions of profound opacity – into trade treaties.

A Specific Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The judge found that plans to dig the first major coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have no impact on national carbon targets. The Labour government subsequently revoked the permission the Tories had approved. Currently, this success faces being overturned by an foreign court accountable to only the corporations bringing the case.

In August, a corporate entity whose ultimate owners reside in the tax haven filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the US capital was convened to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. What legal team is acting on its behalf against the UK administration? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a international entity disputes it through an unaccountable arbitration panel, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know scarce of the case to date, but it appears probable that he’ll use the arbitration process to fight the restrictions the UK levied against him following the Russian aggression. He has previously initiated proceedings against a small nation with similar intent, seeking a colossal sum: half that nation's yearly budget. Among the counsel acting for him in that case? Cherie Blair, married to the former British prime minister.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as security for its financial support package arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states could be blocking the finance Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that such things wouldn’t happen. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “We’ve signed investment treaty upon trade deal and we have never seen a issue in the past.” An expert on this matter accused campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That warning has now materialised. This year, energy and mining firms have lodged a record number of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to halt global warming. Companies have so far won $114bn through ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP