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How do you reckon our system of government works? It could be similar to this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills pass into law. Legislation is maintained by the courts. That's it. Well, that’s how it once functioned. No longer.

The Emergence of Secret Tribunals

Nowadays, international firms, or the billionaires that control them, have the power to sue governments for the laws they pass, at private courts made up of commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these panels grant no opportunity to 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 exclusively to entities based overseas.

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

This compensation represent not actual losses but compensation the arbitrators conclude the company might otherwise have made. The state might be compelled to rescind the measure. It is hesitant to enacting future policies in that area, due to the risk of being sued.

A System Running Rampant

Unprecedented levels of legal actions are being brought, as corporations learn from each other, and hedge funds finance suits for a share of a share of the awards. The consequence? National sovereignty and democratic governance are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the rulings taken by legislatures is that this clause has been incorporated – absent public approval, and often in conditions of profound opacity – inside international trade agreements.

A Specific Instance: The Whitehaven Coalmine

A year ago, activists secured a significant win at the senior court. The presiding officer ruled that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine could have no consequence on national carbon targets. The new government subsequently revoked the permission the previous administration had issued. Now, this victory is under threat by an foreign court answering to only the companies petitioning it.

During August, a company whose ultimate owners are based in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in the US capital was set up to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. Citizens have little idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot the MP. The government passes a law, the national judiciary validates it, then a foreign company disputes it through an secretive private court, and a sitting MP acts on its behalf.

The Russian Lawsuit

Concurrently that the court on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case to date, but it appears probable that he may employ the tribunal to fight the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has initiated proceedings against Luxembourg with similar intent, claiming $16bn: equivalent to half of government’s yearly budget. Included in the legal team representing him there? a prominent lawyer, wife of the previous PM.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over sovereign states could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Costs

Politicians promised that these scenarios wouldn’t happen. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” An expert on this matter accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “when companies grasp the authority they now possess, they will redirect their efforts from the poorer states to the developed economies” were dismissed with scepticism.

That warning has now materialised. Recently, fossil fuel and resource corporations have lodged a historic level of cases against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured $84bn. That equates to the combined GDP