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Can you perceive our system of government works? It could be something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. The law is maintained by the courts. That's it. Well, that’s how it used to work. Not anymore.

The Rise of Secret Courts

Nowadays, overseas companies, and the oligarchs who own them, have the power to sue nation states for the policies they pass, at private courts staffed by commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even enterprises operating from this country. The door is open solely for corporations based overseas.

If a tribunal finds that a government measure could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

This compensation constitute not tangible damages but money the tribunal officials decide the company would perhaps have made. The government may have to rescind the measure. It is hesitant to enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being filed, as corporations observe each other, and investment funds bankroll lawsuits in exchange for a share of the settlements. The result? Sovereignty and democratic governance are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the decisions made by elected bodies is that this stipulation has been inserted – without public consent, and frequently under conditions of total confidentiality – into trade treaties.

A Specific Example: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The justice found that schemes to dig the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine could have no consequence on climate commitments. The incoming administration subsequently revoked the licence the former government had approved. Today, this victory is under threat by an secret arbitration panel reporting to no one but the corporations petitioning it.

Last August, a firm whose beneficial owners are based in the tax haven filed a lawsuit against the UK government. Last week a tribunal in the US capital was established to hear it.

The company is litigating against the UK for the profits it could have earned if the mine had been permitted to commence operations. We have no clear indication how much this sum represents. Who is acting on its behalf against the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot the MP. The state passes a law, the high court validates it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Lawsuit

On the same day that the court on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case so far, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: an amount representing half state's yearly income. Part of the lawyers representing him there? a prominent lawyer, spouse of the ex-UK leader.

Legal experts believe that the EU’s hesitation in utilising seized state funds as security for its loan to Ukraine is due to Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that these scenarios wouldn’t happen. Previously, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An expert on this issue labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations needed to fear these lawsuits. Warnings that “when companies start to realise the authority they now possess, they will redirect their efforts from the poorer states to the strong ones” were greeted by scepticism.

That warning has now materialised. Recently, fossil fuel and resource corporations have initiated a historic level of cases against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to halt global warming. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP