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How do you perceive our system of government works? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills become law. Statutes are enforced by the courts. Simple as that. However, that used to be how it used to work. No longer.

The Emergence of Secret Tribunals

Nowadays, international firms, along with the oligarchs behind them, have the power to sue nation states for the laws they pass, at offshore tribunals staffed by commercial attorneys. The cases take place behind closed doors. Differing from national judiciaries, these panels grant no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including businesses operating from this country. They are open solely for businesses registered abroad.

Should an arbitration panel finds that a law or policy might diminish the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These sums represent not actual losses but funds the tribunal officials decide the company would perhaps have made. The government might be compelled to rescind the measure. It will be deterred from enacting future policies along the same lines, worried about being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being brought, as companies observe each other, and investment funds finance suits for a share of a cut of the takings. The consequence? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the rulings taken by legislatures is that this clause has been inserted – absent public approval, and frequently under conditions of profound opacity – into international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer found that proposals to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The new government later cancelled the permission the former government had approved. Now, this victory is under threat by an foreign court accountable to no one but the corporations petitioning it.

Last August, a company whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. Last week a dispute settlement body in Washington DC was set up to hear it.

The company is litigating against the UK for the money it might have made if the mine had received permission to proceed. We have no clear indication how much this might be. What legal team is representing it in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the domestic court validates it, then a international entity contests it through an undemocratic arbitration panel, and a elected official works for its behalf.

The Russian Challenge

Concurrently that the tribunal on the coal mine dispute was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case so far, but it is highly possible that he’ll use the arbitration process to challenge the sanctions the UK enacted against him following the war in Ukraine. He has already initiated proceedings against Luxembourg with similar intent, claiming $16bn: equivalent to half of government’s annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen state funds as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Threats

The public was told that such things could not occur. In 2014, a government leader, championing the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An expert on this topic described activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “when companies grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning is now a reality. Recently, energy and mining firms have initiated a record number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to stop global warming. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP