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What is your reckon our system of government functions? Perhaps similar to this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. End of story. However, that’s how it once functioned. No longer.

The Emergence of Secret Courts

In the modern era, foreign corporations, and the wealthy individuals who own them, have the power to sue elected administrations for the laws they pass, at offshore tribunals staffed by corporate lawyers. The cases take place in secret. In contrast to domestic courts, these panels grant no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even companies headquartered in this country. They are open solely for corporations based overseas.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

These sums constitute not actual losses but money the panel members conclude the company could potentially have made. The administration may have to drop the legislation. It is discouraged from enacting future policies along the same lines, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of cases are being filed, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a portion of the settlements. The consequence? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions made by elected bodies is that this stipulation has been incorporated – without public consent, and typically amid an atmosphere of extreme secrecy – into trade treaties.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The presiding officer ruled that plans to dig the first major coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The incoming administration then withdrew the licence the Tories had approved. Today, this legal outcome is under threat by an offshore tribunal accountable to exclusively the entities petitioning it.

In August, a company whose final controllers reside in the tax haven lodged a claim challenging the UK government. Last week a arbitration panel in the US capital was set up to consider the case.

This firm is suing the UK for the money it might have made if the mine had been allowed to proceed. Citizens have little idea how much this sum represents. Which individual is representing it in opposition to the state? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the high court validates it, then a foreign company challenges it through an undemocratic private court, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the court on the coalmine case was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the sanctions the UK imposed on him after the war in Ukraine. He has previously initiated proceedings against another European state for this reason, seeking $16bn: half that government’s yearly income. Among the legal team on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in using frozen state funds as guarantee for its financial support package is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over democratic administrations could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Risks

The public was told that these events were not possible. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, stated: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An adviser on this issue described critics of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear such legal actions. Warnings that “once firms grasp the power they’ve been granted, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That threat has come to pass. Recently, energy and mining firms have initiated a historic level of cases against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to stop environmental catastrophe. Corporations have to date won vast sums via ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP