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How do you understand our political system works? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that’s how it used to work. No longer.

The Advent of Secret Courts

Today, overseas companies, or the oligarchs behind them, can sue elected administrations for the laws they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are held behind closed doors. Differing from national judiciaries, these panels grant 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 operating from this country. The door is open solely for entities registered abroad.

Should an arbitration panel rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant compensation of vast sums, running into billions.

This compensation constitute not tangible damages but money the tribunal officials decide the company would perhaps have made. The state might be compelled to drop the legislation. It will be deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations learn from each other, and private equity finance suits in return for a share of the settlements. The outcome? National sovereignty and democratic governance are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the choices made by legislatures is that this provision has been written – absent public approval, and typically amid conditions of profound opacity – within bilateral investment treaties.

A Real-World Instance: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the high court. The judge found that schemes to open the first deep coalmine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine would have no impact on our carbon budgets. The Labour government later cancelled the licence the Tories had issued. Today, this success could be compromised by an secret arbitration panel reporting to exclusively the entities bringing the case.

In August, a company whose beneficial owners are located in the tax haven filed a lawsuit challenging the UK government. Last week a arbitration panel in the United States was set up to hear it.

The company is suing the UK for the money it would have generated if the mine had been permitted to go ahead. We have no idea how much this might be. Who is acting on its behalf challenging the British government? A member of parliament, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The state enacts a policy, the high court upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case so far, but it is highly possible that he may employ the tribunal to contest the sanctions the UK imposed on him following the invasion of Ukraine. He has previously filed a claim against another European state on these grounds, seeking $16bn: half that state's yearly income. Among the counsel acting for him in that case? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states could be blocking the finance Ukraine critically depends on.

Misleading Claims and Growing Threats

Politicians promised that these scenarios could not occur. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An adviser on this topic described critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “once firms begin to understand the power they now possess, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That warning has come to pass. This year, energy and resource corporations have initiated a historic level of suits against nations both wealthy and developing, challenging – similar to the Whitehaven project – state efforts to prevent climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP