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Can you reckon our political system works? Perhaps similar to this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills pass into law. The law is upheld by the courts. That's it. However, that used to be how it operated in the past. No longer.

The Emergence of Secret Courts

Today, overseas companies, or the wealthy individuals behind them, are able to litigate against governments for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases take place behind closed doors. In contrast to domestic courts, these bodies provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies based in this country. Access is granted only to corporations operating from foreign soil.

When a secret court finds that a legislative action could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

This compensation constitute not actual losses but compensation the arbitrators determine the company would perhaps have made. The administration might be compelled to rescind the measure. It is hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of cases are being brought, as corporations observe each other, and private equity finance suits in exchange for a cut of the takings. The consequence? Democratic sovereignty and democracy are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the choices enacted by parliaments is that this provision has been inserted – absent public approval, and frequently under a climate of total confidentiality – into international trade agreements.

A Specific Instance: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The judge ruled that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have had no consequence on national carbon targets. The incoming administration later cancelled the licence the previous administration had approved. Today, this legal outcome faces being overturned by an secret arbitration panel reporting to exclusively the companies petitioning it.

In August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim against the UK government. Last week a tribunal in the United States was convened to hear it.

The company is suing the UK for the profits it could have earned if the mine had been allowed to go ahead. We have no idea how much this sum represents. What legal team is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary validates it, then a foreign company contests it through an secretive arbitration panel, and a elected official works for its behalf.

A Sanctions Lawsuit

On the same day that the panel on the coalmine case was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know little of the case so far, but it is highly possible that he may employ the tribunal to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has filed a claim against Luxembourg on these grounds, seeking $16bn: equivalent to half of nation's yearly income. Part of the lawyers representing him there? a prominent lawyer, married to the ex-UK leader.

Legal experts contend that the EU’s hesitation in utilising seized Russian assets as security for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations may be obstructing the finance Ukraine urgently requires.

False Assurances and Escalating Threats

The public was told that such things wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this matter labelled critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the authority bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with widespread derision.

That warning has come to pass. This year, energy and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – government attempts to stop global warming. Companies have thus far won $114bn through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP