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What is your reckon our system of government works? It could be something like this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. The law is upheld by the courts. End of story. Well, that’s how it used to work. No longer.

The Rise of Secret Courts

Today, overseas companies, or the wealthy individuals behind them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels composed of business advocates. The cases take place behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies headquartered in this country. Access is granted only to corporations operating from foreign soil.

When a secret court rules that a government measure might diminish the corporation’s anticipated profits, it can award compensation of vast sums, potentially billions.

These awards constitute not real financial harm but funds the tribunal officials decide the company would perhaps have made. The government may have to abandon its policy. It will be discouraged from enacting future policies of a similar nature, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as companies observe each other, and private equity fund legal actions in exchange for a share of the awards. The consequence? National sovereignty and popular rule are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can override a country's own laws and the rulings taken by parliaments is that this clause has been inserted – absent public approval, and often in conditions of extreme secrecy – within bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer found that proposals to open the first deep coalmine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the licence the former government had approved. Currently, this success could be compromised by an foreign court answering to no one but the corporations filing the suit.

During August, a firm whose beneficial owners are based in the tax haven lodged a claim versus the UK government. Recently a tribunal in the United States was established to consider the case.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been permitted to commence operations. The public has no idea how much this could amount to. Who is serving as its counsel challenging the British government? An elected representative, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The administration passes a law, the high court validates it, then a foreign company disputes it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Challenge

Concurrently that the court on the coalmine case was appointed, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case at present, but it is highly possible that he will utilise the tribunal to contest the restrictions the UK levied against him after the war in Ukraine. He has previously filed a claim against another European state for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Part of the legal team acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

International law scholars argue that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its financial support package arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

Politicians promised that these events wouldn’t happen. Years ago, a government leader, advocating for the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” An expert on this matter accused activists of “exaggeration … 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. Cautionary notes that “once firms start to realise the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were met with general mockery.

That prediction has come to pass. In the current period, fossil fuel and mining firms have lodged a record number of suits against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – state efforts to halt global warming. Companies have to date won vast sums through ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP