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What is your understand our political system operates? Perhaps along the lines of this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Statutes are enforced by the courts. That's it. Well, that used to be how it used to work. No longer.

The Advent of Secret Courts

In the modern era, international firms, and the oligarchs who own them, can sue elected administrations for the regulations they pass, at offshore tribunals made up of business advocates. The cases take place away from public scrutiny. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, or even businesses operating from this country. The door is open solely for corporations based overseas.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, even billions.

These sums are based not on tangible damages but money the panel members determine the company would perhaps have made. The state might be compelled to rescind the measure. It becomes discouraged from passing future laws of a similar nature, due to the risk of being sued.

A System Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms learn from each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The result? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the decisions taken by legislatures is that this provision has been inserted – without democratic mandate, and frequently under conditions of total confidentiality – into international trade agreements.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the high court. The presiding officer determined that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine could have zero effect on national carbon targets. The new government subsequently revoked the consent the Tories had approved. Currently, this victory could be compromised by an foreign court accountable to exclusively the corporations bringing the case.

Last August, a company whose final controllers reside in the tax haven filed a lawsuit challenging the UK government. Recently a dispute settlement body in Washington DC was established to consider the case.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been allowed to go ahead. We have little idea how much this sum represents. Who is representing it against the state? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company contests it through an secretive private court, and a elected official represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he’ll use the tribunal to fight the restrictions the UK levied against him after the invasion of Ukraine. He has previously started suing another European state on these grounds, demanding a colossal sum: equivalent to half of nation's annual revenue. Among the lawyers acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its financial support package stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations might be preventing the finance Ukraine desperately needs.

Misleading Claims and Mounting Risks

Politicians promised that these events were not possible. Previously, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “The UK has signed trade deal upon trade deal and there has not been a problem in the past.” An adviser on this matter accused campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about ISDS claims. Warnings that “when companies grasp the power they’ve been granted, they will turn their attention from the weak nations to the developed economies” were met with scepticism.

That threat is now a reality. In the current period, oil and gas and mining firms have initiated a record number of suits against nations rich and poor, contesting – as in the case of the Whitehaven project – official measures to stop climate breakdown. Corporations have so far won $114bn through ISDS, of which energy giants have secured the majority. That equates to the combined GDP