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How do you reckon our political system operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills become law. Legislation is upheld by the courts. Simple as that. However, that’s how it used to work. No longer.

The Emergence of Secret Tribunals

In the modern era, international firms, along with the billionaires behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are held in secret. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including companies operating from this country. The door is open exclusively to corporations operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s anticipated profits, it may order financial penalties of vast sums, even billions.

These sums represent not actual losses but funds the tribunal officials determine the company could potentially have made. The government could be forced to rescind the measure. It becomes deterred from enacting future policies along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as corporations learn from each other, and investment funds bankroll lawsuits in return for a portion of the takings. The result? National sovereignty and democratic governance are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings taken by elected bodies is that this clause has been written – absent public approval, and frequently under a climate of total confidentiality – into trade treaties.

A Real-World Instance: The UK Coal Mine

A year ago, a conservation group won a great victory at the High Court. The justice ruled that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The new government then withdrew the licence the former government had approved. Today, this victory faces being overturned by an secret arbitration panel accountable to no one but the corporations filing the suit.

During August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. The previous week a tribunal in Washington DC was established to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to commence operations. The public has no idea how much this sum represents. Which individual is representing it in opposition to the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The state makes a decision, the high court validates it, then a international entity challenges it through an secretive arbitration panel, and a elected official represents its behalf.

The Russian Challenge

Simultaneously that the court on the mining lawsuit was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the sanctions the UK levied against him after the Russian aggression. He has previously initiated proceedings against another European state for this reason, seeking a colossal sum: an amount representing half government’s yearly income. Part of the counsel on his side? Cherie Blair, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen state funds as security for its loan to Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

We were assured that such things wouldn’t happen. In 2014, a senior politician, advocating for the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade deal upon trade deal and we have never seen a problem in the past.” An expert on this issue accused activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “as corporations grasp the authority they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were greeted by general mockery.

That warning has come to pass. This year, fossil fuel and mining firms have initiated a historic level of suits against nations across the economic spectrum, opposing – like the example of the UK mine – government attempts to halt environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP