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How do you perceive our political system works? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. However, that used to be how it operated in the past. Not anymore.

The Emergence of Secret Courts

Today, overseas companies, along with the wealthy individuals that control them, have the power to sue nation states for the laws they pass, at private courts staffed by business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these bodies allow no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses headquartered in this country. They are open exclusively to entities based overseas.

Should an arbitration panel finds that a legislative action could harm the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, running into billions.

This compensation are based not on tangible damages but funds the arbitrators conclude the company would perhaps have made. The administration could be forced to abandon its policy. It becomes deterred from enacting future policies in that area, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a share of the takings. The result? National sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings enacted by parliaments is that this provision has been incorporated – without democratic mandate, and often in conditions of total confidentiality – within bilateral investment treaties.

A Concrete Example: The UK Coal Mine

Twelve months ago, activists secured a significant win at the high court. The justice found that plans to open the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the consent the previous administration had approved. Today, this victory could be compromised by an secret arbitration panel accountable to exclusively the entities filing the suit.

In August, a firm whose beneficial owners are based in the offshore financial centre filed a lawsuit against the UK government. The previous week a arbitration panel in the United States was established to consider the case.

The claimant is suing the UK for the money it might have made if the mine had received permission to commence operations. The public has no idea how much this could amount to. Who is serving as its counsel in opposition to the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a foreign company challenges it through an secretive offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coalmine case was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case at present, but it seems likely that he’ll use the arbitration process to challenge the sanctions the UK imposed on him after the war in Ukraine. He has already initiated proceedings against Luxembourg for this reason, demanding $16bn: an amount representing half nation's annual revenue. Included in the lawyers representing him there? a prominent lawyer, wife of the previous PM.

Legal experts argue that the EU’s procrastination in using frozen Russian assets as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations could be blocking the funds Ukraine critically depends on.

Empty Promises and Growing Threats

Politicians promised that such things could not occur. In 2014, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An adviser on this topic accused campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “as corporations grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with scepticism.

That threat is now a reality. In the current period, energy and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, contesting – like the example of the UK mine – state efforts to halt climate breakdown. Corporations have to date won vast sums through ISDS, of which oil majors have secured the majority. That equates to the combined GDP