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How do you understand our political system functions? Maybe along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that was how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Today, overseas companies, along with the billionaires behind them, can sue nation states for the regulations they pass, at secret arbitration panels composed of commercial attorneys. These proceedings take place away from public scrutiny. In contrast to domestic courts, 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 companies operating from this country. They are open only to corporations operating from foreign soil.

Should an arbitration panel finds that a government measure might diminish the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These sums are based not on real financial harm but compensation the panel members determine the company could potentially have made. The state could be forced to drop the legislation. It will be hesitant to introducing similar legislation along the same lines, worried about facing litigation.

A System Growing Exponentially

Record numbers of disputes are being initiated, as companies learn from each other, and investment funds bankroll lawsuits for a share of a share of the takings. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the decisions taken by legislatures is that this stipulation has been written – absent public approval, and frequently under conditions of extreme secrecy – inside trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The justice determined that schemes to dig the first deep coalmine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on national carbon targets. The new government subsequently revoked the consent the Tories had granted. Today, this success could be compromised by an offshore tribunal answering to no one but the companies filing the suit.

During August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in the United States was convened to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to go ahead. We have little idea how much this sum represents. Who is acting on its behalf challenging the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The administration passes a law, the high court supports it, then a international entity disputes it through an undemocratic private court, and a elected official represents its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he’ll use the ISDS mechanism to fight the restrictions the UK levied against him subsequent to the Russian aggression. He has already filed a claim against Luxembourg with similar intent, claiming a colossal sum: equivalent to half of nation's yearly budget. Part of the legal team on his side? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over democratic administrations may be obstructing the finance Ukraine desperately needs.

False Assurances and Escalating Costs

We were assured that these scenarios wouldn’t happen. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, told us: “We’ve signed trade agreement upon trade deal and there has never been a case in the past.” An expert on this issue labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Warnings that “when companies start to realise the authority they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That warning has come to pass. This year, oil and gas and mining firms have initiated a historic level of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – government attempts to prevent global warming. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That equates to the combined GDP