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How do you understand our political system functions? It could be something like this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. That's it. Yet, that used to be how it operated in the past. Those days are over.

The Advent of Secret Courts

Nowadays, overseas companies, along with the wealthy individuals that control them, have the power to sue nation states for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these bodies grant no opportunity to appeal or legal review. The general public cannot take a case to them, just as our government, or even companies based in this country. Access is granted solely for corporations operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, running into billions.

These sums are based not on actual losses but money the arbitrators conclude the company could potentially have made. The administration might be compelled to rescind the measure. It becomes deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A Process Running Rampant

Record numbers of disputes are being brought, as firms take cues from each other, and private equity finance suits for a share of a portion of the settlements. The result? Democratic sovereignty and democratic governance are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the choices taken by legislatures is that this stipulation has been inserted – absent public approval, and frequently under conditions of extreme secrecy – inside trade treaties.

A Real-World Example: The UK Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The presiding officer determined that proposals to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the consent the previous administration had granted. Currently, this victory could be compromised by an secret arbitration panel reporting to only the corporations petitioning it.

During August, a company whose final controllers are based in the tax haven lodged a claim against the UK government. Last week a dispute settlement body in the US capital was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been permitted to go ahead. Citizens have no clear indication how much this sum represents. Which individual is serving as its counsel challenging the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a elected official represents its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case to date, but it appears probable that he may employ the tribunal to challenge the restrictions the UK enacted against him after the war in Ukraine. He has already filed a claim against Luxembourg with similar intent, seeking sixteen billion dollars: equivalent to half of government’s annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine critically depends on.

False Assurances and Escalating Threats

Politicians promised that these scenarios were not possible. In 2014, a government leader, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade agreement upon trade deal and there has not been a issue in the past.” An expert on this topic labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear ISDS claims. Warnings that “when companies start to realise the authority they’ve been granted, they will shift their focus from the poorer states to the strong ones” were met with scepticism.

That threat is now a reality. This year, oil and gas and resource corporations have filed a unprecedented number of claims against nations rich and poor, opposing – similar to the UK mine – state efforts to halt global warming. Firms have so far won $114bn through ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP