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What is your perceive our system of government works? Maybe similar to this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Legislation is upheld by the courts. Simple as that. However, that’s how it operated in the past. Not anymore.

The Advent of Secret Courts

Today, foreign corporations, or the wealthy individuals behind them, are able to litigate against elected administrations for the laws they pass, at private courts composed of commercial attorneys. These proceedings take place behind closed doors. Differing from national judiciaries, these panels allow no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises operating from this country. Access is granted only to entities operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums represent not actual losses but money the arbitrators decide the company could potentially have made. The administration may have to rescind the measure. It is hesitant to passing future laws in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of disputes are being brought, as corporations observe each other, and private equity finance suits for a share of a portion of the settlements. The outcome? Sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the choices made by legislatures is that this provision has been incorporated – without democratic mandate, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Real-World Example: The UK Coalmine

Twelve months ago, a conservation group won a great victory at the High Court. The presiding officer found that schemes to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine could have no impact on our carbon budgets. The incoming administration then withdrew the licence the former government had issued. Now, this legal outcome is under threat by an offshore tribunal accountable to exclusively the companies filing the suit.

In August, a firm whose final controllers reside in the tax haven lodged a claim challenging the UK government. Last week a tribunal in Washington DC was established to hear it.

This firm is litigating against the UK for the money it could have earned if the mine had received permission to commence operations. We have no idea how much this sum represents. What legal team is representing it challenging the state? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The state enacts a policy, the national judiciary validates it, then a international entity disputes it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case at present, but it seems likely that he’ll use the arbitration process to challenge the sanctions the UK levied against him following the war in Ukraine. He has already filed a claim against another European state with similar intent, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the legal team on his side? a prominent lawyer, wife of the previous PM.

Legal experts contend that the EU’s procrastination in utilising seized oligarchs' funds as security for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Costs

The public was told that such things wouldn’t happen. Previously, a government leader, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An expert on this matter accused campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about these lawsuits. Warnings that “when companies start to realise the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That warning has now materialised. This year, oil and gas and resource corporations have filed a historic level of suits against nations both wealthy and developing, contesting – similar to the Whitehaven project – government attempts to prevent global warming. Corporations have so far won vast sums through ISDS, of which energy giants have obtained $84bn. That represents the combined GDP