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How do you understand our political system functions? Maybe similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Well, that was how it used to work. Not anymore.

The Emergence of Secret Courts

In the modern era, foreign corporations, or the oligarchs that control them, can sue elected administrations for the policies they pass, at private courts staffed by commercial attorneys. These proceedings take place away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even businesses operating from this country. Access is granted exclusively to entities registered abroad.

If a tribunal determines that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of vast sums, running into billions.

These sums constitute not actual losses but compensation the tribunal officials determine the company might otherwise have made. The administration could be forced to rescind the measure. It is discouraged from enacting future policies in that area, due to the risk of being sued.

A Process Growing Exponentially

Record numbers of legal actions are being brought, as corporations learn from each other, and private equity fund legal actions in return for a portion of the awards. The consequence? Sovereignty and democratic governance are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the rulings enacted by legislatures is that this clause has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – into trade treaties.

A Real-World Instance: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the high court. The justice found that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the permission the previous administration had granted. Currently, this legal outcome is under threat by an foreign court accountable to only the corporations petitioning it.

During August, a corporate entity whose final controllers are located in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was established to consider the case.

This firm is suing the UK for the revenue it might have made if the mine had been permitted to commence operations. Citizens have no clear indication how much this could amount to. Who is serving as its counsel in opposition to the British government? A sitting MP, and ex-law officer in the Conservative government, that great patriot the MP. The administration enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

Concurrently that the panel on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case at present, but it seems likely that he will utilise the arbitration process to contest the penalties the UK enacted against him after the Russian aggression. He has already initiated proceedings against a small nation for this reason, claiming $16bn: half that state's yearly budget. Included in the lawyers representing him there? a prominent lawyer, married to the ex-UK leader.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over elected governments could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Risks

The public was told that these events could not occur. Previously, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this matter labelled campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states had to worry about these lawsuits. Warnings that “when companies begin to understand the influence bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with scepticism.

That prediction has come to pass. Recently, energy and resource corporations have initiated a unprecedented number of suits against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – government attempts to stop global warming. Firms have thus far won vast sums by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP