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How do you understand our system of government works? Maybe something like this. We elect MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. That's it. Well, that was how it once functioned. Those days are over.

The Rise of Secret Courts

Nowadays, foreign corporations, or the oligarchs that control them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels composed of business advocates. The cases 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, and neither can our government, or even businesses based in this country. Access is granted only to corporations based overseas.

If a tribunal finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These sums represent not tangible damages but funds the arbitrators decide the company might otherwise have made. The administration might be compelled to rescind the measure. It is deterred from passing future laws of a similar nature, for fear of facing litigation.

A Process Spiralling Out of Control

Historically high figures of disputes are being filed, as corporations observe each other, and hedge funds finance suits for a share of a share of the settlements. The result? National sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the rulings taken by legislatures is that this clause has been incorporated – absent public approval, and frequently under conditions of extreme secrecy – inside bilateral investment treaties.

A Specific Case: The UK Coalmine

Last year, activists won a great victory at the High Court. The judge ruled that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no consequence on climate commitments. The incoming administration later cancelled the licence the Tories had granted. Now, this success faces being overturned by an offshore tribunal reporting to only the companies filing the suit.

In August, a firm whose final controllers reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a arbitration panel in the US capital was established to consider the case.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Which individual is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, the noted patriot the MP. The state enacts a policy, the domestic court validates it, then a foreign company contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case so far, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK imposed on him following the war in Ukraine. He has started suing another European state on these grounds, seeking a colossal sum: equivalent to half of nation's annual revenue. Included in the lawyers representing him there? a prominent lawyer, married to the ex-UK leader.

Legal experts argue that the EU’s delay in utilising seized Russian assets as collateral for its financial support package is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over democratic administrations may be obstructing the funds Ukraine urgently requires.

Empty Promises and Mounting Costs

We were assured that these events wouldn’t happen. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, told us: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this issue labelled campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with scepticism.

That prediction is now a reality. Recently, oil and gas and resource corporations have lodged a unprecedented number of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have so far won vast sums through ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP