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What is your reckon our political system functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Legislation is maintained by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Emergence of Secret Courts

Today, overseas companies, and the oligarchs that control them, are able to litigate against governments for the policies they pass, at private courts made up of corporate lawyers. Such disputes take place behind closed doors. In contrast to domestic courts, these tribunals grant no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises operating from this country. Access is granted exclusively to corporations operating from foreign soil.

If a tribunal rules that a legislative action could harm the corporation’s expected profits, it may order compensation of vast sums, running into billions.

This compensation constitute not actual losses but funds the panel members conclude the company might otherwise have made. The government might be compelled to abandon its policy. It is deterred from introducing similar legislation in that area, due to the risk of facing litigation.

A System Growing Exponentially

Unprecedented levels of disputes are being brought, as companies observe each other, and private equity finance suits for a share of a portion of the awards. The result? Democratic sovereignty and democracy are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the rulings made by parliaments is that this provision has been incorporated – absent public approval, and often in an atmosphere of profound opacity – within trade treaties.

A Real-World Instance: The UK Coal Mine

Last year, a conservation group secured a significant win at the high court. The justice determined that schemes to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine would have no consequence on national carbon targets. The Labour government later cancelled the permission the former government had approved. Currently, this victory could be compromised by an offshore tribunal reporting to no one but the companies petitioning it.

In August, a company whose final controllers are based in the Cayman Islands lodged a claim challenging the UK government. Recently a dispute settlement body in Washington DC was established to hear it.

The company is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. Citizens have little idea how much this could amount to. Who is serving as its counsel against the British government? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously filed a claim against a small nation with similar intent, seeking a colossal sum: an amount representing half nation's yearly income. Among the counsel representing him there? Cherie Blair, spouse of the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen state funds as collateral for its financial support package arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over democratic administrations may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Costs

The public was told that these events were not possible. Previously, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “The UK has signed investment treaty upon trade deal and there has not been a case in the past.” A consultant on this matter described activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states needed to fear such legal actions. Warnings that “as corporations grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. Recently, energy and resource corporations have filed a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – state efforts to stop global warming. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained eighty-four billion dollars. That is equivalent to the combined GDP