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Can you understand our political system operates? Maybe similar to this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that’s how it used to work. No longer.

The Advent of Secret Courts

Nowadays, international firms, or the oligarchs who own them, can sue nation states for the regulations they pass, at private courts composed of corporate lawyers. Such disputes are held behind closed doors. In contrast to domestic courts, these tribunals grant no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions, running into billions.

These awards represent not tangible damages but money the tribunal officials conclude the company could potentially have made. The government might be compelled to rescind the measure. It becomes deterred from passing future laws of a similar nature, for fear of being sued.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as firms observe each other, and hedge funds bankroll lawsuits in return for a share of the settlements. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the rulings taken by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under conditions of profound opacity – within international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

A year ago, activists secured a significant win at the High Court. The justice ruled that plans to open the first major coal mine in the UK for three decades, in northwest England, were wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have no consequence on climate commitments. The Labour government subsequently revoked the licence the Tories had approved. Today, this legal outcome is under threat by an secret arbitration panel accountable to no one but the corporations bringing the case.

In August, a corporate entity whose beneficial owners reside in the Cayman Islands filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was established to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had received permission to go ahead. We have little idea how much this could amount to. Which individual is representing it against the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a international entity contests it through an secretive private court, and a member of our parliament represents its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case to date, but it seems likely that he may employ the arbitration process to challenge the penalties the UK enacted against him after the invasion of Ukraine. He has previously started suing a small nation with similar intent, seeking $16bn: half that state's yearly income. Among the lawyers representing him there? Cherie Blair, spouse of the ex-UK leader.

International law scholars argue that the EU’s procrastination in utilising seized Russian assets as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine urgently requires.

Misleading Claims and Escalating Costs

Politicians promised that these events could not occur. Years ago, a government leader, championing the largest and riskiest of all these agreements, told us: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An expert on this issue accused critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by these lawsuits. Predictions that “as corporations start to realise the authority bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were met with widespread derision.

That prediction has come to pass. Recently, fossil fuel and resource corporations have initiated a unprecedented number of suits against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP