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What is your reckon our political system functions? It could be along the lines of this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills pass into law. Legislation are enforced by the courts. Simple as that. However, that’s how it once functioned. No longer.

The Rise of Secret Courts

Nowadays, international firms, or the oligarchs behind them, can sue nation states for the laws they pass, at offshore tribunals composed of business advocates. The cases are held in secret. In contrast to domestic courts, these panels allow no right of appeal or judicial review. You or I are unable to file a case to them, and neither can our government, including companies based in this country. They are open solely for businesses operating from foreign soil.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, potentially billions.

These sums represent not tangible damages but funds the panel members decide the company would perhaps have made. The state could be forced to rescind the measure. It is deterred from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as corporations learn from each other, and investment funds finance suits in exchange for a cut of the takings. The outcome? National sovereignty and democratic governance are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the rulings enacted by elected bodies is that this provision has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – within trade treaties.

A Real-World Example: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The judge found that schemes to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the licence the Tories had approved. Currently, this success could be compromised by an offshore tribunal reporting to only the companies bringing the case.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands filed a lawsuit against the UK government. Recently a arbitration panel in the United States was convened to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this might be. Which individual is representing it in opposition to the state? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The state passes a law, the national judiciary validates it, then a foreign company challenges it through an secretive private court, and a member of our parliament works for its behalf.

The Russian Lawsuit

Simultaneously that the panel on the mining lawsuit was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case so far, but it appears probable that he’ll use the tribunal to contest the restrictions the UK imposed on him following the Russian aggression. He has started suing another European state with similar intent, claiming sixteen billion dollars: an amount representing half nation's yearly income. Part of the legal team acting for him in that case? Cherie Blair, married to the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states could be blocking the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

Politicians promised that such things were not possible. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this issue accused critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms begin to understand the authority they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with scepticism.

That warning is now a reality. Recently, energy and extraction companies have filed a record number of suits against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have so far won $114bn through ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP