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What is your reckon our political system functions? Perhaps similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills become law. Legislation is upheld by the courts. Simple as that. However, that used to be how it once functioned. No longer.

The Emergence of Secret Courts

Nowadays, international firms, and the wealthy individuals who own them, can sue nation states for the regulations they pass, at private courts made up of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these panels grant no right of appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, including companies headquartered in this country. They are open solely for entities operating from foreign soil.

Should an arbitration panel rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, even billions.

These sums represent not real financial harm but funds the arbitrators determine the company would perhaps have made. The state could be forced to abandon its policy. It is hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being filed, as corporations learn from each other, and investment funds bankroll lawsuits for a share of a share of the awards. The result? Democratic sovereignty and popular rule are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions enacted by parliaments is that this provision has been inserted – without public consent, and frequently under a climate of profound opacity – into bilateral investment treaties.

A Concrete Example: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice ruled that proposals to dig the first deep coalmine in the UK for 30 years, in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no impact on climate commitments. The new government subsequently revoked the licence the previous administration had approved. Currently, this victory could be compromised by an secret arbitration panel accountable to exclusively the entities petitioning it.

During August, a company whose final controllers are located in the offshore financial centre filed a lawsuit against the UK government. The previous week a tribunal in the US capital was convened to adjudicate on it.

The claimant is litigating against the UK for the revenue it might have made if the mine had been allowed to go ahead. We have little idea how much this could amount to. What legal team is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a international entity challenges it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Challenge

On the same day that the court on the coalmine case was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he may employ the arbitration process to contest the penalties the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against a small nation with similar intent, seeking a colossal sum: an amount representing half nation's annual revenue. Included in the lawyers on his side? a prominent lawyer, spouse of the ex-UK leader.

Legal experts believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

False Assurances and Escalating Costs

We were assured that these scenarios could not occur. Years ago, a senior politician, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this matter accused activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states had to worry about ISDS claims. Warnings that “once firms begin to understand the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. This year, energy and extraction companies have lodged a historic level of suits against nations both wealthy and developing, contesting – similar to the Whitehaven project – government attempts to prevent environmental catastrophe. Firms have to date won $114bn via ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP