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What is your reckon our system of government functions? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. Yet, that’s how it used to work. Those days are over.

The Rise of Secret Courts

Nowadays, foreign corporations, and the oligarchs that control them, can sue governments for the regulations they pass, at offshore tribunals composed of business advocates. The cases are conducted away from public scrutiny. Unlike our courts, these bodies allow no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies headquartered in this country. They are open only to businesses operating from foreign soil.

When a secret court rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, running into billions.

These awards represent not actual losses but money the panel members decide the company could potentially have made. The government could be forced to drop the legislation. It is deterred from passing future laws along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations take cues from each other, and hedge funds finance suits for a share of a portion of the settlements. The consequence? Democratic sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the rulings taken by elected bodies is that this provision has been written – without public consent, and often in conditions of total confidentiality – inside bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The presiding officer found that proposals to open the first deep coalmine in the UK for three decades, in Cumbria, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The Labour government then withdrew the permission the previous administration had approved. Today, this success is under threat by an secret arbitration panel answering to no one but the entities bringing the case.

In August, a company whose ultimate owners are based in the tax haven initiated proceedings against the UK government. Recently a arbitration panel in the United States was established to hear it.

The claimant is litigating against the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have little idea how much this might be. What legal team is acting on its behalf challenging the state? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The state enacts a policy, the high court upholds it, then a international entity disputes it through an unaccountable offshore tribunal, and a elected official works for its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coalmine case was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously initiated proceedings against another European state with similar intent, seeking a colossal sum: equivalent to half of government’s yearly budget. Among the legal team representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts contend that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

False Assurances and Escalating Costs

The public was told that such things could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic described critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about ISDS claims. Warnings that “as corporations grasp the authority they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by scepticism.

That prediction is now a reality. In the current period, oil and gas and extraction companies have initiated a historic level of suits against nations across the economic spectrum, contesting – similar to the Whitehaven project – official measures to halt environmental catastrophe. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP