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How do you understand our political system operates? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills pass into law. Statutes is maintained by the courts. That's it. Yet, that was how it once functioned. Those days are over.

The Rise of Secret Courts

In the modern era, international firms, or the billionaires behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these panels grant no avenue for 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 exclusively to corporations operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions, potentially billions.

These sums represent not real financial harm but compensation the panel members conclude the company would perhaps have made. The state may have to rescind the measure. It will be deterred from introducing similar legislation in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Historically high figures of legal actions are being filed, as corporations take cues from each other, and hedge funds bankroll lawsuits for a share of a share of the takings. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the rulings made by parliaments is that this clause has been inserted – absent public approval, and often in an atmosphere of total confidentiality – inside bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that schemes to open the first major coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The Labour government later cancelled the consent the Tories had approved. Now, this success is under threat by an foreign court accountable to exclusively the entities filing the suit.

In August, a firm whose beneficial owners are based in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in Washington DC was convened to consider the case.

The company is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this could amount to. Which individual is representing it challenging the state? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a overseas corporation contests it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case so far, but it seems likely that he’ll use the tribunal to fight the restrictions the UK enacted against him after the Russian aggression. He has already initiated proceedings against another European state with similar intent, seeking sixteen billion dollars: equivalent to half of nation's annual revenue. Among the counsel on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Threats

We were assured that these events wouldn’t happen. Previously, a former prime minister, promoting the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade deal upon trade deal and there has not been a case in the past.” An expert on this matter described activists of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “as corporations begin to understand the power they now possess, they will turn their attention from the vulnerable countries to the strong ones” were greeted by scepticism.

That warning has now materialised. Recently, oil and gas and extraction companies have lodged a unprecedented number of suits against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP