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What is your reckon our political system functions? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Rise of Secret Courts

In the modern era, overseas companies, along with the oligarchs behind them, can sue nation states for the laws they pass, at private courts composed of commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these bodies provide no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even companies operating from this country. Access is granted exclusively to entities operating from foreign soil.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards represent not tangible damages but funds the tribunal officials decide the company would perhaps have made. The state could be forced to rescind the measure. It is hesitant to passing future laws in that area, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as corporations take cues from each other, and private equity fund legal actions in return for a cut of the awards. The consequence? National sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the decisions enacted by elected bodies is that this clause has been inserted – absent public approval, and typically amid conditions of profound opacity – inside trade treaties.

A Specific Example: The UK Coal Mine

Last year, activists secured a significant win at the high court. The justice determined that plans to dig the first deep coalmine in the UK for a generation, in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have had zero effect on national carbon targets. The Labour government subsequently revoked the consent the former government had approved. Today, this victory is under threat by an offshore tribunal accountable to no one but the companies filing the suit.

Last August, a firm whose final controllers are located in the offshore financial centre filed a lawsuit against the UK government. The previous week a dispute settlement body in the US capital was set up to consider the case.

This firm is suing the UK for the money it could have earned if the mine had received permission to commence operations. We have little idea how much this could amount to. Which individual is representing it challenging the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the high court upholds it, then a international entity contests it through an secretive private court, and a elected official represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case at present, but it is highly possible that he may employ the ISDS mechanism to contest the restrictions the UK enacted against him following the war in Ukraine. He has already initiated proceedings against a small nation on these grounds, seeking $16bn: half that government’s yearly income. Included in the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen Russian assets as collateral for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Growing Threats

Politicians promised that such things were not possible. Previously, a government leader, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this topic accused activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that solely developing countries had to worry about such legal actions. Warnings that “once firms begin to understand the influence bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with widespread derision.

That prediction is now a reality. This year, fossil fuel and extraction companies have filed a record number of suits against nations both wealthy and developing, opposing – similar to the Cumbrian coalmine – official measures to prevent climate breakdown. Companies have to date won vast sums by using ISDS, of which energy giants have secured the majority. That equates to the combined GDP