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What is your reckon our political system works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Statutes is maintained by the courts. End of story. However, that’s how it used to work. No longer.

The Advent of Secret Courts

In the modern era, foreign corporations, or the oligarchs who own them, can sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. The cases are conducted in secret. Differing from national judiciaries, these bodies provide no avenue for appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. They are open exclusively to corporations based overseas.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it may order damages of hundreds of millions of pounds, running into billions.

This compensation constitute not actual losses but funds the panel members decide the company could potentially have made. The administration may have to drop the legislation. It is deterred from passing future laws along the same lines, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as corporations observe each other, and hedge funds finance suits in exchange for a cut of the settlements. The consequence? Sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings enacted by legislatures is that this provision has been written – without public consent, and frequently under conditions of extreme secrecy – within trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, a conservation group won a great victory at the High Court. The judge found that plans to open the first major coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have had no impact on climate commitments. The Labour government later cancelled the permission the Tories had issued. Today, this success is under threat by an offshore tribunal accountable to exclusively the corporations filing the suit.

During August, a firm whose final controllers reside in the tax haven filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was convened to adjudicate on it.

This firm is suing the UK for the revenue it would have generated if the mine had received permission to go ahead. We have no clear indication how much this sum represents. Who is serving as its counsel challenging the state? A sitting MP, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the domestic court supports it, then a foreign company disputes it through an undemocratic private court, and a sitting MP works for its behalf.

A Sanctions Challenge

On the same day that the panel on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it appears probable that he may employ the tribunal to contest the penalties the UK enacted against him after the invasion of Ukraine. He has started suing a small nation on these grounds, seeking a colossal sum: half that state's yearly income. Included in the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its financial support package is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that such things wouldn’t happen. In 2014, a senior politician, championing the largest and riskiest of all such treaties, declared: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this topic accused critics of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “when companies begin to understand the influence bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That warning has now materialised. Recently, fossil fuel and resource corporations have lodged a record number of cases against nations rich and poor, opposing – like the example of the Whitehaven project – state efforts to stop climate breakdown. Corporations have so far won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP