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Can you perceive our political system functions? Perhaps similar to this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that was how it once functioned. No longer.

The Emergence of Secret Tribunals

Today, international firms, along with the billionaires behind them, have the power to sue governments for the laws they pass, at offshore tribunals composed of corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these bodies provide no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including businesses operating from this country. They are open exclusively to entities operating from foreign soil.

If a tribunal finds that a government measure may compromise the corporation’s projected profits, it can award compensation of vast sums, potentially billions.

These sums represent not real financial harm but compensation the tribunal officials determine the company would perhaps have made. The government might be compelled to abandon its policy. It is hesitant to enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being brought, as companies learn from each other, and private equity bankroll lawsuits for a share of a cut of the awards. The outcome? Democratic sovereignty and democratic governance are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the rulings taken by elected bodies is that this stipulation has been written – absent public approval, and often in conditions of total confidentiality – into international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The justice found that plans to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The new government subsequently revoked the consent the former government had granted. Today, this victory could be compromised by an offshore tribunal accountable to only the entities petitioning it.

During August, a corporate entity whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. Last week a tribunal in the US capital was established to hear it.

The claimant is suing the UK for the profits it might have made if the mine had been allowed to commence operations. Citizens have no idea how much this sum represents. Which individual is representing it against the state? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the high court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Challenge

Concurrently that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the sanctions the UK enacted against him following the Russian aggression. He has already started suing Luxembourg with similar intent, claiming $16bn: equivalent to half of state's yearly budget. Among the counsel on his side? Cherie Blair, wife of the previous PM.

Legal experts argue that the EU’s hesitation in using frozen state funds as guarantee for its financial support package stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over sovereign states could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Costs

Politicians promised that such things wouldn’t happen. Previously, a government leader, promoting the largest and riskiest of all investment pacts, stated: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this issue accused activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations needed to fear ISDS claims. Predictions that “once firms begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That prediction has come to pass. Recently, fossil fuel and extraction companies have initiated a record number of cases against nations rich and poor, contesting – similar to the Whitehaven project – government attempts to prevent global warming. Companies have thus far won $114bn by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP