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What is your reckon our political system operates? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills pass into law. Statutes is upheld by the courts. Simple as that. Yet, that’s how it operated in the past. Those days are over.

The Rise of Secret Courts

In the modern era, overseas companies, and the wealthy individuals who own them, can sue nation states for the policies they pass, at private courts made up of business advocates. Such disputes are conducted behind closed doors. Unlike our courts, these panels grant no right of appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, including businesses based in this country. The door is open solely for entities registered abroad.

If a tribunal finds that a law or policy might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

This compensation are based not on actual losses but compensation the arbitrators decide the company might otherwise have made. The government may have to abandon its policy. It becomes hesitant to passing future laws of a similar nature, due to the risk of facing litigation.

A System Running Rampant

Historically high figures of disputes are being brought, as corporations learn from each other, and private equity finance suits in exchange for a cut of the settlements. The result? Sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions made by legislatures is that this clause has been incorporated – absent public approval, and typically amid conditions of profound opacity – within trade treaties.

A Real-World Example: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the senior court. The judge ruled that plans to open the first major coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no impact on climate commitments. The Labour government then withdrew the licence the Tories had approved. Currently, this legal outcome is under threat by an secret arbitration panel answering to no one but the companies bringing the case.

In August, a firm whose ultimate owners are located in the tax haven lodged a claim against the UK government. Last week a arbitration panel in the US capital was established to consider the case.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. Which individual is serving as its counsel against the British government? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a foreign company disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case at present, but it appears probable that he will utilise the arbitration process to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has filed a claim against Luxembourg on these grounds, seeking a colossal sum: an amount representing half nation's annual revenue. Part of the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

International law scholars believe that the EU’s delay in utilising seized state funds as collateral for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Mounting Risks

The public was told that such things could not occur. Previously, a government leader, advocating for the biggest and most dangerous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this topic labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about these lawsuits. Predictions that “when companies begin to understand the power they’ve been granted, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That prediction has come to pass. Recently, oil and gas and extraction companies have lodged a record number of claims against nations rich and poor, contesting – like the example of the UK mine – state efforts to halt climate breakdown. Corporations have to date won vast sums by using ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP