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Can you understand our political system functions? Maybe similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. Legislation are enforced by the courts. That's it. Well, that was how it operated in the past. No longer.

The Rise of Secret Courts

In the modern era, foreign corporations, along with the billionaires behind them, have the power to sue governments for the laws they pass, at offshore tribunals made up of business advocates. These proceedings are conducted behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, including businesses headquartered in this country. Access is granted only to entities based overseas.

Should an arbitration panel rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

These sums represent not actual losses but funds the panel members conclude the company would perhaps have made. The government may have to drop the legislation. It becomes hesitant to introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being brought, as companies take cues from each other, and private equity fund legal actions in exchange for a portion of the takings. The consequence? Sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings taken by legislatures is that this provision has been written – without democratic mandate, and typically amid an atmosphere of total confidentiality – inside trade treaties.

A Real-World Case: The UK Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the high court. The presiding officer found that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine would have had zero effect on national carbon targets. The Labour government later cancelled the licence the former government had granted. Today, this legal outcome is under threat by an secret arbitration panel accountable to no one but the entities petitioning it.

During August, a corporate entity whose final controllers are based in the tax haven lodged a claim against the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been allowed to proceed. We have little idea how much this sum represents. Which individual is representing it in opposition to the state? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The state enacts a policy, the national judiciary supports it, then a international entity contests it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case to date, but it seems likely that he may employ the arbitration process to fight the restrictions the UK levied against him after the war in Ukraine. He has previously initiated proceedings against a small nation with similar intent, claiming sixteen billion dollars: an amount representing half government’s annual revenue. Part of the legal team acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Legal experts argue that the EU’s delay in utilising seized state funds as security for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that these events could not occur. Years ago, a senior politician, promoting the most significant and hazardous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has not been a case in the past.” A consultant on this issue accused activists of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “as corporations begin to understand the influence bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were met with widespread derision.

That prediction is now a reality. Recently, energy and mining firms have initiated a unprecedented number of claims against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – government attempts to stop environmental catastrophe. Companies have to date won $114bn by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP