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Can you understand our political system functions? Perhaps similar to this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. Legislation is maintained by the courts. End of story. However, that’s how it used to work. Those days are over.

The Advent of Secret Courts

Today, overseas companies, and the wealthy individuals who own them, can sue governments for the policies they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are conducted behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises headquartered in this country. Access is granted only to entities registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These sums represent not actual losses but money the panel members decide the company might otherwise have made. The government may have to drop the legislation. It is hesitant to introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as firms observe each other, and private equity fund legal actions in return for a cut of the awards. The result? Sovereignty and democracy are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the choices taken by parliaments is that this clause has been incorporated – absent public approval, and frequently under conditions of profound opacity – within international trade agreements.

A Concrete Example: The UK Coal Mine

Last year, activists won a great victory at the high court. The presiding officer found that proposals to excavate the first major coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have had no impact on our carbon budgets. The new government later cancelled the licence the former government had approved. Currently, this success is under threat by an foreign court reporting to only the corporations filing the suit.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

The company is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. We have no idea how much this could amount to. Who is serving as its counsel in opposition to the British government? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the high court supports it, then a overseas corporation disputes it through an secretive offshore tribunal, and a elected official represents its behalf.

A Sanctions Case

On the same day that the court on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case so far, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, claiming sixteen billion dollars: an amount representing half nation's yearly income. Among the legal team acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists argue that the EU’s delay in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Risks

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, promoting the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade agreement upon trade deal and there has not been a problem in the past.” A consultant on this issue accused campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies grasp the influence they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by scepticism.

That prediction has now materialised. In the current period, energy and mining firms have lodged a historic level of claims against nations both wealthy and developing, contesting – similar to the UK mine – official measures to halt global warming. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP