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Can you understand our political system functions? Perhaps similar to this. We elect MPs. They vote on bills. If a majority is achieved, the bills pass into law. Legislation is maintained by the courts. That's it. However, that used to be how it used to work. No longer.

The Emergence of Secret Courts

Nowadays, foreign corporations, and the wealthy individuals who own them, have the power to sue nation states for the laws they pass, at secret arbitration panels composed of commercial attorneys. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies grant no right of appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even companies operating from this country. They are open exclusively to entities registered abroad.

If a tribunal rules that a government measure could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation are based not on tangible damages but compensation the panel members decide the company would perhaps have made. The government may have to rescind the measure. It will be hesitant to introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of legal actions are being filed, as corporations observe each other, and private equity bankroll lawsuits in return for a cut of the settlements. The result? National sovereignty and democracy are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the decisions taken by legislatures is that this clause has been written – without democratic mandate, and typically amid conditions of total confidentiality – inside international trade agreements.

A Specific Example: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The judge ruled that plans to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have had no impact on national carbon targets. The new government then withdrew the licence the previous administration had issued. Currently, this legal outcome is under threat by an foreign court reporting to no one but the companies bringing the case.

During August, a firm whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. Last week a tribunal in Washington DC was established to adjudicate on it.

The claimant is suing the UK for the money it might have made if the mine had received permission to commence operations. Citizens have little idea how much this could amount to. What legal team is acting on its behalf against the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the national judiciary supports it, then a foreign company disputes it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coalmine case was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know little of the case to date, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously started suing Luxembourg on these grounds, claiming a colossal sum: equivalent to half of nation's annual revenue. Among the lawyers acting for him in that case? Cherie Blair, married to the ex-UK leader.

Trade specialists contend that the EU’s delay in using frozen Russian assets as security for its financial support package arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Costs

The public was told that these events wouldn’t happen. Years ago, a senior politician, championing the largest and riskiest of all such treaties, declared: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” An adviser on this matter described critics of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “once firms begin to understand the influence bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction is now a reality. This year, oil and gas and mining firms have filed a historic level of cases against nations both wealthy and developing, contesting – similar to the Whitehaven project – state efforts to halt environmental catastrophe. Companies have so far won vast sums via ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP