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What is your reckon our political system works? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills pass into law. The law are enforced by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Rise of Secret Courts

Nowadays, overseas companies, along with the wealthy individuals that control them, have the power to sue elected administrations for the regulations they pass, at private courts made up of commercial attorneys. The cases take place in secret. Unlike our courts, these bodies provide no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for corporations registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s expected profits, it may order damages of vast sums, even billions.

This compensation constitute not tangible damages but funds the panel members conclude the company could potentially have made. The government could be forced to abandon its policy. It becomes discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A System Growing Exponentially

Unprecedented levels of cases are being filed, as companies observe each other, and private equity finance suits for a share of a portion of the settlements. The result? Democratic sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the rulings taken by legislatures is that this provision has been inserted – absent public approval, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The UK Coalmine

A year ago, activists won a great victory at the High Court. The presiding officer found that schemes to open the first new deep coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The new government later cancelled the permission the Tories had approved. Currently, this legal outcome faces being overturned by an offshore tribunal answering to only the entities filing the suit.

Last August, a corporate entity whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. Last week a dispute settlement body in the United States was set up to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. We have no idea how much this could amount to. What legal team is acting on its behalf challenging the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a foreign company disputes it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the coalmine case was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case so far, but it appears probable that he will utilise the ISDS mechanism to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has started suing Luxembourg for this reason, demanding a colossal sum: equivalent to half of government’s yearly income. Included in the counsel on his side? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised state funds as collateral for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the money Ukraine urgently requires.

Empty Promises and Growing Costs

We were assured that such things could not occur. Years ago, a senior politician, promoting the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this issue labelled campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations begin to understand the power they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with scepticism.

That threat has come to pass. In the current period, energy and extraction companies have filed a unprecedented number of claims against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – government attempts to stop global warming. Companies have so far won $114bn through ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP