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Can you reckon our system of government functions? Perhaps something like this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. Well, that used to be how it operated in the past. No longer.

The Emergence of Secret Courts

Nowadays, overseas companies, and the billionaires behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels composed of business advocates. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no avenue for appeal or legal review. You or I are unable to file a case to them, nor can our government, or even companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

When a secret court finds that a law or policy might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but funds the panel members determine the company could potentially have made. The administration could be forced to abandon its policy. It is hesitant to enacting future policies of a similar nature, worried about being sued.

A System Spiralling Out of Control

Record numbers of cases are being brought, as corporations learn from each other, and investment funds finance suits for a share of a portion of the awards. The outcome? Democratic sovereignty and democratic governance are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the choices taken by parliaments is that this stipulation has been written – without democratic mandate, and typically amid a climate of total confidentiality – inside trade treaties.

A Specific Example: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The judge ruled that schemes to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no impact on climate commitments. The incoming administration then withdrew the consent the previous administration had issued. Now, this legal outcome faces being overturned by an secret arbitration panel accountable to only the companies bringing the case.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre lodged a claim against the UK government. The previous week a dispute settlement body in the US capital was set up to adjudicate on it.

The claimant is suing the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has no idea how much this could amount to. What legal team is representing it challenging the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coalmine case was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are little of the case at present, but it seems likely that he’ll use the tribunal to fight the sanctions the UK levied against him subsequent to the war in Ukraine. He has already initiated proceedings against another European state on these grounds, seeking a colossal sum: half that nation's yearly income. Part of the legal team on his side? the wife of a former prime minister, wife of the previous PM.

Legal experts argue that the EU’s hesitation in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Costs

Politicians promised that these scenarios were not possible. Years ago, a former prime minister, promoting the most significant and hazardous of all investment pacts, declared: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An adviser on this matter described critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “as corporations begin to understand the influence they’ve been granted, they will shift their focus from the weak nations to the developed economies” were greeted by scepticism.

That prediction has now materialised. This year, fossil fuel and mining firms have lodged a historic level of claims against nations rich and poor, opposing – like the example of the Whitehaven project – government attempts to prevent global warming. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP