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Can you understand our political system operates? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Emergence of Secret Courts

Today, overseas companies, or the wealthy individuals behind them, are able to litigate against governments for the policies they pass, at offshore tribunals staffed by commercial attorneys. The cases take place behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses headquartered in this country. The door is open only to businesses registered abroad.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but money the arbitrators decide the company would perhaps have made. The government might be compelled to drop the legislation. It will be deterred from introducing similar legislation of a similar nature, for fear of being sued.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as corporations learn from each other, and hedge funds finance suits for a share of a share of the awards. The consequence? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the decisions enacted by legislatures is that this stipulation has been written – without democratic mandate, and frequently under an atmosphere of total confidentiality – within bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The justice ruled that proposals to excavate the first major coal mine in the UK for a generation, in northwest England, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The new government subsequently revoked the licence the Tories had issued. Today, this victory is under threat by an secret arbitration panel accountable to exclusively the corporations petitioning it.

During August, a corporate entity whose final controllers are based in the Cayman Islands filed a lawsuit against the UK government. The previous week a tribunal in Washington DC was convened to adjudicate on it.

The company is suing the UK for the money it might have made if the mine had been allowed to go ahead. We have no clear indication how much this might be. Which individual is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the domestic court supports it, then a overseas corporation challenges it through an secretive private court, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK imposed on him following the war in Ukraine. He has started suing Luxembourg with similar intent, seeking a colossal sum: an amount representing half state's yearly budget. Among the counsel representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as guarantee for its financial support package stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Risks

Politicians promised that such things were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed trade deal upon trade deal and we have never seen a problem in the past.” An expert on this topic described campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries had to worry about ISDS claims. Warnings that “when companies start to realise the influence bestowed upon them, they will turn their attention from the weak nations to the developed economies” were dismissed with widespread derision.

That threat has now materialised. Recently, oil and gas and resource corporations have filed a record number of claims against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – official measures to halt climate breakdown. Companies have so far won $114bn via ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP