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Can you understand our political system works? Maybe similar to this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that was how it operated in the past. No longer.

The Rise of Secret Courts

Nowadays, overseas companies, or the oligarchs that control them, can sue governments for the regulations they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. You or I cannot take a case to them, and neither can our government, or even companies operating from this country. The door is open solely for businesses based overseas.

Should an arbitration panel determines that a law or policy might diminish the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

This compensation constitute not real financial harm but funds the arbitrators decide the company would perhaps have made. The government could be forced to rescind the measure. It becomes discouraged from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being brought, as firms observe each other, and private equity bankroll lawsuits in return for a share of the awards. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the choices taken by legislatures is that this clause has been inserted – without public consent, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Specific Example: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the high court. The presiding officer determined that plans to dig the first deep coalmine in the UK for 30 years, in northwest England, had been illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on national carbon targets. The Labour government subsequently revoked the licence the Tories had approved. Currently, this legal outcome faces being overturned by an foreign court reporting to only the corporations petitioning it.

In August, a corporate entity whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was set up to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to commence operations. Citizens have no clear indication how much this sum represents. Which individual is representing it against the state? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a foreign company disputes it through an unaccountable private court, and a elected official works for its behalf.

An Oligarch's Case

On the same day that the court on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case so far, but it seems likely that he will utilise the tribunal to challenge the sanctions the UK levied against him after the invasion of Ukraine. He has filed a claim against another European state for this reason, seeking a colossal sum: equivalent to half of government’s yearly budget. Among the counsel acting for him in that case? a prominent lawyer, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen oligarchs' funds as collateral for its financial support package stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over elected governments might be preventing the finance Ukraine critically depends on.

False Assurances and Growing Costs

Politicians promised that such things were not possible. In 2014, a former prime minister, advocating for the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade agreement upon trade deal and there has never been a case in the past.” An expert on this topic accused activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “when companies grasp the influence they now possess, they will turn their attention from the poorer states to the strong ones” were met with general mockery.

That prediction has now materialised. This year, energy and resource corporations have initiated a record number of suits against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – state efforts to halt global warming. Companies have thus far won $114bn by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP