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How do you perceive our political system operates? Maybe similar to this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that was how it used to work. No longer.

The Emergence of Secret Courts

Today, overseas companies, or the wealthy individuals that control them, have the power to sue nation states for the laws they pass, at private courts staffed by corporate lawyers. The cases are held away from public scrutiny. In contrast to domestic courts, these bodies allow no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. They are open only to entities registered abroad.

Should an arbitration panel rules that a government measure might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

This compensation constitute not real financial harm but money the arbitrators determine the company might otherwise have made. The administration may have to drop the legislation. It becomes discouraged from passing future laws of a similar nature, due to the risk of being sued.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as firms take cues from each other, and private equity fund legal actions in return for a cut of the settlements. The result? Democratic sovereignty and democracy are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the decisions taken by parliaments is that this stipulation has been incorporated – absent public approval, and frequently under a climate of profound opacity – within international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge found that plans to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the permission the Tories had issued. Today, this legal outcome could be compromised by an offshore tribunal reporting to only the corporations petitioning it.

Last August, a corporate entity whose final controllers reside in the tax haven lodged a claim challenging the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

This firm is suing the UK for the revenue it might have made if the mine had received permission to commence operations. Citizens have no clear indication how much this could amount to. Which individual is acting on its behalf against the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a foreign company challenges it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it is highly possible that he’ll use the tribunal to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, seeking a colossal sum: equivalent to half of nation's annual revenue. Part of the legal team on his side? a prominent lawyer, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in utilising seized state funds as security for its financial support package is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Misleading Claims and Escalating Risks

We were assured that such things could not occur. Years ago, a former prime minister, promoting the biggest and most dangerous of all these agreements, stated: “We’ve signed trade agreement upon trade deal and there has never been a case in the past.” An expert 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. Warnings that “when companies begin to understand the power they’ve been granted, they will turn their attention from the poorer states to the strong ones” were dismissed with scepticism.

That warning has come to pass. This year, energy and resource corporations have initiated a historic level of suits against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Companies have so far won $114bn by using ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP