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How do you understand our system of government operates? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills become law. The law are enforced by the courts. End of story. Well, that’s how it operated in the past. Not anymore.

The Advent of Secret Courts

Nowadays, international firms, and the oligarchs that control them, have the power to sue governments for the regulations they pass, at offshore tribunals composed of business advocates. The cases are conducted in secret. Differing from national judiciaries, these panels provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses based in this country. The door is open solely for corporations based overseas.

If a tribunal determines that a law or policy could harm the corporation’s projected profits, it may order damages of vast sums, potentially billions.

This compensation represent not actual losses but compensation the tribunal officials conclude the company could potentially have made. The state could be forced to drop the legislation. It becomes hesitant to introducing similar legislation in that area, worried about facing litigation.

A Process Running Rampant

Historically high figures of disputes are being initiated, as corporations take cues from each other, and private equity fund legal actions in return for a share of the awards. The consequence? Democratic sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the choices made by legislatures is that this clause has been written – without democratic mandate, and frequently under a climate of extreme secrecy – inside trade treaties.

A Real-World Case: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer found that proposals to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have zero effect on our carbon budgets. The Labour government subsequently revoked the permission the previous administration had granted. Now, this legal outcome is under threat by an offshore tribunal reporting to only the corporations bringing the case.

During August, a corporate entity whose final controllers are based in the tax haven initiated proceedings against the UK government. The previous week a arbitration panel in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the profits it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this might be. What legal team is acting on its behalf in opposition to the British government? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a foreign company disputes it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

Concurrently that the court on the coalmine case was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case to date, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK enacted against him following the invasion of Ukraine. He has previously initiated proceedings against a small nation with similar intent, seeking sixteen billion dollars: equivalent to half of nation's annual revenue. Part of the counsel acting for him in that case? a prominent lawyer, wife of the previous PM.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Empty Promises and Growing Risks

The public was told that such things wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this issue labelled activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Warnings that “when companies start to realise the authority they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. Recently, oil and gas and mining firms have lodged a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – state efforts to halt environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP