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How do you understand our political system functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Well, that was how it once functioned. Those days are over.

The Advent of Secret Tribunals

Today, overseas companies, and 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. The cases are conducted in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, just as our government, including enterprises operating from this country. The door is open solely for businesses registered abroad.

When a secret court finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant damages of vast sums, running into billions.

These sums represent not tangible damages but compensation the panel members decide the company could potentially have made. The state may have to rescind the measure. It will be hesitant to enacting future policies of a similar nature, worried about facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms observe each other, and hedge funds finance suits for a share of a cut of the settlements. The consequence? Democratic sovereignty and democratic governance are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the rulings taken by elected bodies is that this clause has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – inside trade treaties.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, activists won a great victory at the senior court. The judge found that plans to dig the first major coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have no impact on national carbon targets. The new government then withdrew the consent the Tories had granted. Currently, this legal outcome could be compromised by an offshore tribunal accountable to only the entities petitioning it.

Last August, a firm whose final controllers are located in the Cayman Islands lodged a claim against the UK government. The previous week a tribunal in the US capital was established to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had been allowed to proceed. We have little idea how much this sum represents. Which individual is representing it challenging the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coalmine case was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case so far, but it seems likely that he’ll use the arbitration process to challenge the sanctions the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against another European state for this reason, demanding $16bn: half that government’s yearly budget. Included in the lawyers on his side? Cherie Blair, spouse of the former British prime minister.

Legal experts argue that the EU’s hesitation in utilising seized state funds as guarantee for its financial support package stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that these events wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all such treaties, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a problem in the past.” An expert on this matter labelled activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “when companies start to realise the influence bestowed upon them, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That prediction has now materialised. This year, oil and gas and mining firms have initiated a historic level of claims against nations rich and poor, challenging – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured $84bn. That equates to the combined GDP