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How do you understand our political system operates? Maybe along the lines of this. We elect MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. The law is maintained by the courts. End of story. Well, that was how it operated in the past. Those days are over.

The Advent of Secret Courts

In the modern era, overseas companies, along with the oligarchs that control them, can sue governments for the regulations they pass, at private courts staffed by corporate lawyers. The cases are conducted in secret. In contrast to domestic courts, these tribunals provide no right of appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even enterprises based in this country. The door is open solely for entities based overseas.

If a tribunal finds that a law or policy might diminish the corporation’s expected profits, it can award damages of vast sums, even billions.

These awards represent not actual losses but funds the tribunal officials conclude the company might otherwise have made. The government might be compelled to drop the legislation. It becomes deterred from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being brought, as corporations observe each other, and hedge funds finance suits for a share of a share of the takings. The consequence? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the decisions enacted by parliaments is that this provision has been written – without public consent, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge ruled that schemes to open the first new deep coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government later cancelled the consent the Tories had approved. Now, this success faces being overturned by an offshore tribunal reporting to exclusively the corporations petitioning it.

Last August, a company whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Recently a dispute settlement body in the US capital was set up to consider the case.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this might be. Who is representing it against the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK imposed on him after the war in Ukraine. He has previously started suing another European state with similar intent, claiming $16bn: half that nation's yearly budget. Part of the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as collateral for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Growing Threats

The public was told that these events were not possible. In 2014, a government leader, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “when companies start to realise the influence they’ve been granted, they will shift their focus from the poorer states to the strong ones” were greeted by widespread derision.

That warning is now a reality. In the current period, oil and gas and mining firms have lodged a unprecedented number of claims against nations rich and poor, challenging – similar to the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have to date won $114bn through ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP