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What is your understand our political system functions? Perhaps something like this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Emergence of Secret Courts

Nowadays, foreign corporations, along with the wealthy individuals who own them, are able to litigate against governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings take place away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even companies headquartered in this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, potentially billions.

These sums are based not on tangible damages but funds the panel members determine the company could potentially have made. The government might be compelled to abandon its policy. It will be hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of cases are being brought, as corporations observe each other, and private equity fund legal actions in return for a portion of the settlements. The outcome? Democratic sovereignty and democratic governance are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the choices taken by parliaments is that this stipulation has been incorporated – without public consent, and frequently under a climate of total confidentiality – inside bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

A year ago, activists won a great victory at the High Court. The justice determined that plans to open the first deep coalmine in the UK for a generation, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have had zero effect on national carbon targets. The incoming administration subsequently revoked the consent the Tories had issued. Currently, this success is under threat by an offshore tribunal accountable to only the companies bringing the case.

In August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings against the UK government. Recently a tribunal in Washington DC was set up to hear it.

This firm is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. We have little idea how much this sum represents. Who is acting on its behalf challenging the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament works for its behalf.

A Sanctions Challenge

On the same day that the panel on the coal mine dispute was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case so far, but it appears probable that he’ll use the tribunal to challenge the penalties the UK imposed on him after the war in Ukraine. He has previously initiated proceedings against Luxembourg for this reason, demanding a colossal sum: half that state's yearly income. Among the legal team acting for him in that case? Cherie Blair, married to the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen oligarchs' funds as security for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations could be blocking the funds Ukraine critically depends on.

False Assurances and Growing Costs

The public was told that such things could not occur. Years ago, a government leader, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An adviser on this matter labelled campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “as corporations grasp the authority they’ve been granted, they will turn their attention from the weak nations to the strong ones” were dismissed with scepticism.

That warning is now a reality. In the current period, fossil fuel and extraction companies have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – official measures to stop environmental catastrophe. Corporations have to date won $114bn via ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP