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How do you reckon our political system functions? Maybe similar to this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. Well, that’s how it operated in the past. No longer.

The Emergence of Secret Courts

Nowadays, overseas companies, along with the oligarchs that control them, have the power to sue nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases take place away from public scrutiny. Differing from national judiciaries, these bodies grant no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including businesses headquartered in this country. They are open solely for corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it may order compensation of hundreds of millions, potentially billions.

This compensation represent not actual losses but compensation the arbitrators conclude the company could potentially have made. The government might be compelled to drop the legislation. It becomes discouraged from passing future laws of a similar nature, worried about facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being initiated, as firms observe each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The outcome? Sovereignty and popular rule are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the choices enacted by elected bodies is that this provision has been incorporated – absent public approval, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Concrete Example: The Cumbrian Coalmine

Last year, a conservation group achieved a major legal triumph at the High Court. The presiding officer determined that proposals to open the first deep coalmine in the UK for a generation, in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no consequence on national carbon targets. The incoming administration later cancelled the licence the Tories had approved. Today, this victory is under threat by an offshore tribunal answering to only the entities bringing the case.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. Recently a dispute settlement body in the US capital was established to hear it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. Citizens have no idea how much this could amount to. What legal team is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot the MP. The administration enacts a policy, the high court upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

The Russian Challenge

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows little of the case to date, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK enacted against him after the war in Ukraine. He has filed a claim against Luxembourg with similar intent, seeking sixteen billion dollars: equivalent to half of state's yearly budget. Part of the legal team on his side? a prominent lawyer, wife of the ex-UK leader.

International law scholars contend that the EU’s delay in using frozen state funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the funds Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that these scenarios could not occur. Years ago, a government leader, championing the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” An adviser on this topic labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries needed to fear such legal actions. Cautionary notes that “as corporations grasp the authority they now possess, they will shift their focus from the vulnerable countries to the developed economies” were met with widespread derision.

That warning is now a reality. In the current period, fossil fuel and resource corporations have filed a record number of suits against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – official measures to halt climate breakdown. Companies have to date won vast sums through ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP