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Can you understand our political system operates? Perhaps similar to this. The public votes for MPs. They vote on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that’s how it once functioned. No longer.

The Advent of Secret Courts

Today, international firms, or the oligarchs that control them, have the power to sue nation states for the regulations they pass, at secret arbitration panels made up of commercial attorneys. These proceedings take place behind closed doors. In contrast to domestic courts, these tribunals provide 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 based in this country. The door is open only to corporations based overseas.

If a tribunal finds that a law or policy may compromise the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

This compensation are based not on real financial harm but compensation the arbitrators conclude the company would perhaps have made. The state may have to abandon its policy. It is deterred from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as firms learn from each other, and investment funds fund legal actions for a share of a share of the settlements. The result? Sovereignty and democracy are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the rulings enacted by elected bodies is that this clause has been written – without democratic mandate, and frequently under conditions of profound opacity – into international trade agreements.

A Concrete Example: The UK Coalmine

Twelve months ago, activists secured a significant win at the senior court. The judge determined that plans to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have zero effect on national carbon targets. The new government subsequently revoked the consent the former government had issued. Now, this success faces being overturned by an secret arbitration panel answering to exclusively the entities petitioning it.

During August, a company whose final controllers reside in the Cayman Islands lodged a claim challenging the UK government. Last week a arbitration panel in the United States was convened to consider the case.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to proceed. The public has no idea how much this sum represents. Which individual is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a foreign company disputes it through an secretive private court, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, claiming a colossal sum: equivalent to half of government’s yearly income. Part of the counsel acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Growing Costs

We were assured that such things wouldn’t happen. Years ago, a government leader, advocating for the largest and riskiest of all these agreements, declared: “The UK has signed investment treaty upon trade deal and there has not been a case in the past.” An expert on this topic accused activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations begin to understand the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were met with widespread derision.

That prediction is now a reality. Recently, fossil fuel and extraction companies have filed a historic level of suits against nations across the economic spectrum, contesting – like the example of the Whitehaven project – government attempts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP