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Can you understand our political system works? It could be along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills become law. The law is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Rise of Secret Courts

Today, foreign corporations, along with the wealthy individuals who own them, can sue elected administrations for the laws they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are held behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. The general public are unable to file a case to them, just as our government, or even enterprises operating from this country. The door is open only to businesses based overseas.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These sums represent not tangible damages but funds the panel members conclude the company might otherwise have made. The state might be compelled to abandon its policy. It will be hesitant to passing future laws in that area, worried about incurring a lawsuit.

A Process Growing Exponentially

Record numbers of cases are being brought, as companies take cues from each other, and investment funds bankroll lawsuits for a share of a cut of the takings. The result? National sovereignty and democracy are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the decisions taken by legislatures is that this clause has been inserted – absent public approval, and frequently under an atmosphere of total confidentiality – within trade treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the High Court. The judge found that schemes to excavate the first deep coalmine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the permission the former government had issued. Today, this legal outcome could be compromised by an foreign court reporting to only the corporations filing the suit.

In August, a corporate entity whose ultimate owners reside in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in the US capital was set up to consider the case.

The company is seeking compensation from the UK for the money it would have generated if the mine had been allowed to proceed. The public has little idea how much this might be. What legal team is representing it challenging the UK administration? An elected representative, and ex-law officer in the previous government, the self-proclaimed 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 member of our parliament works for its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coalmine case was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it seems likely that he’ll use the tribunal to challenge the penalties the UK levied against him following the war in Ukraine. He has already filed a claim against a small nation for this reason, seeking sixteen billion dollars: an amount representing half government’s yearly income. Part of the counsel on his side? Cherie Blair, spouse of the former British prime minister.

International law scholars contend that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that such things were not possible. Previously, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” A consultant on this issue described activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear ISDS claims. Predictions that “once firms start to realise the authority they now possess, they will turn their attention from the weak nations to the developed economies” were met with general mockery.

That prediction is now a reality. In the current period, energy and extraction companies have filed a record number of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – government attempts to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That represents the combined GDP