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Can you reckon our political system operates? It could be something like this. We elect MPs. They vote on bills. If a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. Well, that was how it once functioned. No longer.

The Rise of Secret Courts

In the modern era, overseas companies, and the oligarchs that control them, can sue nation states for the laws they pass, at private courts staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. Unlike our courts, these panels provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even businesses operating from this country. Access is granted exclusively to entities operating from foreign soil.

When a secret court determines that a law or policy could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These awards represent not actual losses but money the panel members determine the company might otherwise have made. The state might be compelled to drop the legislation. It is discouraged from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being filed, as corporations take cues from each other, and investment funds finance suits in exchange for a share of the settlements. The consequence? Sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the decisions enacted by parliaments is that this stipulation has been incorporated – absent public approval, and typically amid conditions of total confidentiality – into trade treaties.

A Specific Case: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer determined that proposals to open the first new deep coal mine in the UK for 30 years, 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 no consequence on climate commitments. The Labour government later cancelled the licence the former government had granted. Currently, this victory is under threat by an foreign court answering to exclusively the entities petitioning it.

During August, a firm whose final controllers reside in the offshore financial centre lodged a claim challenging the UK government. Last week a tribunal in Washington DC was set up to hear it.

The company is suing the UK for the profits it could have earned if the mine had received permission to go ahead. Citizens have no idea how much this might be. Which individual is acting on its behalf against the state? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot the MP. The state passes a law, the domestic court upholds it, then a foreign company contests it through an undemocratic private court, and a elected official works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coalmine case was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the sanctions the UK levied against him following the war in Ukraine. He has already initiated proceedings against Luxembourg for this reason, claiming a colossal sum: equivalent to half of nation's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars contend that the EU’s procrastination in utilising seized Russian assets as collateral for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

Empty Promises and Mounting Costs

The public was told that these scenarios were not possible. Years ago, a senior politician, promoting the biggest and most dangerous of all these agreements, declared: “We’ve signed trade deal upon trade deal and we have never seen a issue in the past.” An expert on this issue labelled campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear these lawsuits. Warnings that “when companies grasp the power they now possess, they will shift their focus from the weak nations to the wealthy nations” were greeted by general mockery.

That warning has now materialised. In the current period, fossil fuel and extraction companies have lodged a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – official measures to halt global warming. Firms have to date won $114bn through ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP