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What is your reckon our political system operates? It could be something like this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that was how it once functioned. Not anymore.

The Rise of Secret Courts

In the modern era, foreign corporations, along with the billionaires behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes take place in secret. Unlike our courts, these bodies provide no avenue for appeal or legal review. You or I are unable to file a case to them, just as our government, or even companies based in this country. Access is granted solely for corporations registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s projected profits, it may order compensation of hundreds of millions, even billions.

These awards are based not on actual losses but compensation the arbitrators determine the company could potentially have made. The administration might be compelled to drop the legislation. It will be discouraged from introducing similar legislation of a similar nature, worried about being sued.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as companies learn from each other, and hedge funds finance suits for a share of a cut of the takings. The result? Democratic sovereignty and democracy are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the rulings made by legislatures is that this stipulation has been incorporated – without democratic mandate, and often in conditions of profound opacity – into trade treaties.

A Concrete Case: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer determined that plans to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine would have no consequence on national carbon targets. The new government subsequently revoked the consent the former government had issued. Currently, this success faces being overturned by an foreign court reporting to exclusively the entities petitioning it.

In August, a firm whose beneficial owners reside in the Cayman Islands initiated proceedings against the UK government. Recently a arbitration panel in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had received permission to proceed. The public has little idea how much this might be. What legal team is acting on its behalf challenging the state? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the national judiciary supports it, then a overseas corporation disputes it through an undemocratic private court, and a elected official acts on its behalf.

The Russian Case

Simultaneously that the panel on the coalmine case was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the restrictions the UK imposed on him following the war in Ukraine. He has started suing another European state on these grounds, demanding $16bn: equivalent to half of state's annual revenue. Part of the legal team on his side? Cherie Blair, wife of the previous PM.

International law scholars contend that the EU’s hesitation in using frozen oligarchs' funds as security for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over elected governments might be preventing the finance Ukraine urgently requires.

Empty Promises and Escalating Costs

The public was told that these events were not possible. In 2014, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade agreement upon trade deal and there has not been a issue in the past.” A consultant on this topic accused campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “when companies start to realise the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were dismissed with general mockery.

That threat is now a reality. In the current period, fossil fuel and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Companies have thus far won $114bn via ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP