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Can you reckon our political system functions? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Rise of Secret Courts

Today, overseas companies, and the billionaires behind them, can sue nation states for the policies they pass, at offshore tribunals composed of business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these tribunals allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including businesses based in this country. They are open exclusively to corporations operating from foreign soil.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation represent not real financial harm but compensation the tribunal officials determine the company could potentially have made. The administration might be compelled to drop the legislation. It becomes deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A System Growing Exponentially

Record numbers of cases are being filed, as companies learn from each other, and investment funds bankroll lawsuits in exchange for a portion of the takings. The outcome? National sovereignty and democratic governance are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the decisions made by legislatures is that this clause has been inserted – without public consent, and often in a climate of total confidentiality – inside international trade agreements.

A Real-World Case: The Whitehaven Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The justice found that proposals to dig the first major coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have had zero effect on our carbon budgets. The Labour government later cancelled the consent the previous administration had issued. Today, this legal outcome faces being overturned by an foreign court accountable to no one but the entities bringing the case.

In August, a corporate entity whose final controllers are located in the tax haven initiated proceedings challenging the UK government. Recently a tribunal in the US capital was set up to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to go ahead. We have little idea how much this could amount to. Which individual is representing it against the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The state passes a law, the domestic court supports it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the mining lawsuit was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case to date, but it appears probable that he’ll use the tribunal to fight the sanctions the UK imposed on him following the war in Ukraine. He has started suing Luxembourg for this reason, seeking sixteen billion dollars: equivalent to half of nation's yearly budget. Included in the legal team representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Costs

We were assured that these events were not possible. Previously, a government leader, championing the most significant and hazardous of all these agreements, declared: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An adviser on this matter labelled campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Predictions that “when companies grasp the influence they now possess, they will turn their attention from the weak nations to the wealthy nations” were met with widespread derision.

That warning is now a reality. Recently, oil and gas and resource corporations have initiated a record number of suits against nations across the economic spectrum, challenging – like the example of the Whitehaven project – state efforts to halt climate breakdown. Corporations have so far won vast sums through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP