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What is your perceive our political system works? Perhaps something like this. We elect MPs. They vote on bills. Should a majority is achieved, the bills become law. Legislation is maintained by the courts. End of story. Yet, that was how it once functioned. No longer.

The Advent of Secret Tribunals

In the modern era, foreign corporations, and the billionaires who own them, can sue elected administrations for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises headquartered in this country. The door is open exclusively to businesses registered abroad.

Should an arbitration panel finds that a law or policy could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation represent not tangible damages but money the tribunal officials determine the company would perhaps have made. The state may have to rescind the measure. It will be discouraged from enacting future policies in that area, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as firms learn from each other, and hedge funds finance suits for a share of a cut of the awards. The result? National sovereignty and popular rule are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the choices enacted by legislatures is that this provision has been inserted – without public consent, and frequently under conditions of total confidentiality – within international trade agreements.

A Real-World Example: The UK Coalmine

Last year, activists won a great victory at the High Court. The presiding officer ruled that schemes to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine could have no consequence on national carbon targets. The new government then withdrew the licence the Tories had approved. Today, this victory is under threat by an offshore tribunal accountable to exclusively the corporations bringing the case.

Last August, a company whose final controllers are located in the Cayman Islands lodged a claim against the UK government. Recently a tribunal in the US capital was established to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had been allowed to go ahead. The public has no clear indication how much this might be. Who is serving as its counsel in opposition to the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The state enacts a policy, the national judiciary validates it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official represents its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he will utilise the tribunal to contest the restrictions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against another European state on these grounds, seeking a colossal sum: equivalent to half of state's yearly income. Included in the legal team representing him there? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists argue that the EU’s procrastination in utilising seized state funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine urgently requires.

Misleading Claims and Growing Threats

Politicians promised that these events were not possible. In 2014, a government leader, promoting the biggest and most dangerous of all these agreements, stated: “We’ve signed investment treaty upon trade deal and we have never seen a issue in the past.” An adviser on this topic labelled critics of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear these lawsuits. Predictions that “once firms start to realise the influence bestowed upon them, they will shift their focus from the weak nations to the developed economies” were dismissed with general mockery.

That warning has come to pass. Recently, energy and resource corporations have lodged a historic level of cases against nations both wealthy and developing, opposing – similar to the UK mine – government attempts to halt global warming. Firms have so far won $114bn by using ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP