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How do you understand our political system works? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills become law. Legislation is upheld by the courts. End of story. Yet, that used to be how it operated in the past. No longer.

The Emergence of Secret Courts

Nowadays, foreign corporations, or the billionaires that control them, can sue governments for the laws they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even businesses operating from this country. They are open solely for corporations operating from foreign soil.

If a tribunal finds that a law or policy may compromise the corporation’s anticipated profits, it may order compensation of vast sums, potentially billions.

These sums are based not on tangible damages but money the arbitrators conclude the company would perhaps have made. The administration could be forced to abandon its policy. It becomes deterred from enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Growing Exponentially

Record numbers of legal actions are being initiated, as corporations learn from each other, and private equity bankroll lawsuits in return for a portion of the settlements. The result? Sovereignty and democracy are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the rulings enacted by parliaments is that this stipulation has been incorporated – absent public approval, and frequently under conditions of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The Cumbrian Coalmine

Last year, activists secured a significant win at the high court. The judge ruled that plans to dig the first deep coalmine in the UK for three decades, in northwest England, were unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration later cancelled the consent the previous administration had issued. Today, this legal outcome could be compromised by an foreign court answering to exclusively the corporations filing the suit.

Last August, a firm whose final controllers are located in the Cayman Islands initiated proceedings challenging the UK government. Last week a arbitration panel in the US capital was set up to consider the case.

The company is litigating against the UK for the profits it could have earned if the mine had received permission to commence operations. The public has no idea how much this might be. What legal team is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a foreign company contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it seems likely that he will utilise the arbitration process to contest the restrictions the UK enacted against him after the Russian aggression. He has previously initiated proceedings against Luxembourg for this reason, claiming a colossal sum: half that state's yearly income. Included in the lawyers on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized Russian assets as collateral for its financial support package is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that these scenarios could not occur. Years ago, a former prime minister, promoting the largest and riskiest of all investment pacts, told us: “The UK has signed trade deal upon trade deal and we have never seen a issue in the past.” An expert on this issue accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations had to worry about these lawsuits. Warnings that “when companies begin to understand the influence bestowed upon them, they will turn their attention from the poorer states to the developed economies” were met with general mockery.

That prediction has now materialised. Recently, fossil fuel and resource corporations have lodged a unprecedented number of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Firms have to date won vast sums through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP