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How do you reckon our political system operates? It could be something like this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Legislation are enforced by the courts. That's it. Yet, that used to be how it operated in the past. Those days are over.

The Emergence of Secret Courts

In the modern era, overseas companies, along with the wealthy individuals that control them, can sue nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or judicial review. You or I cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted solely for corporations operating from foreign soil.

When a secret court finds that a law or policy could harm the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but funds the arbitrators conclude the company would perhaps have made. The administration may have to abandon its policy. It is deterred from introducing similar legislation in that area, for fear of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of cases are being brought, as firms observe each other, and hedge funds finance suits in exchange for a cut of the awards. The outcome? Democratic sovereignty and popular rule are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the choices taken by legislatures is that this provision has been inserted – absent public approval, and often in a climate of profound opacity – inside bilateral investment treaties.

A Concrete Example: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The judge determined that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine could have no consequence on climate commitments. The new government later cancelled the consent the previous administration had approved. Now, this victory could be compromised by an foreign court answering to only the entities filing the suit.

During August, a firm whose final controllers reside in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was established to hear it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been allowed to commence operations. Citizens have little idea how much this could amount to. Which individual is serving as its counsel challenging the UK administration? A sitting MP, and former attorney-general in the Conservative government, the noted patriot the MP. The state enacts a policy, the domestic court validates it, then a international entity challenges it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coal mine dispute was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case so far, but it seems likely that he will utilise the arbitration process to contest the restrictions the UK levied against him subsequent to the Russian aggression. He has previously started suing Luxembourg on these grounds, claiming a colossal sum: half that nation's annual revenue. Included in the counsel representing him there? Cherie Blair, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments might be preventing the finance Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these scenarios could not occur. In 2014, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” A consultant on this topic described critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear such legal actions. Warnings that “once firms grasp the influence bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. In the current period, energy and extraction companies have initiated a unprecedented number of claims against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have thus far won vast sums through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP