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Can you reckon our system of government operates? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is secured, the bills pass into law. Statutes is maintained by the courts. End of story. However, that’s how it used to work. No longer.

The Rise of Secret Courts

Nowadays, international firms, or the billionaires that control them, can sue governments for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are held behind closed doors. In contrast to domestic courts, these bodies grant no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even businesses based in this country. The door is open exclusively to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of vast sums, even billions.

These sums represent not real financial harm but money the tribunal officials decide the company would perhaps have made. The administration might be compelled to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Record numbers of legal actions are being brought, as corporations learn from each other, and private equity bankroll lawsuits for a share of a portion of the awards. The outcome? Democratic sovereignty and popular rule are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the decisions taken by legislatures is that this clause has been written – absent public approval, and often in conditions of extreme secrecy – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Last year, a conservation group secured a significant win at the high court. The justice found that plans to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have no consequence on our carbon budgets. The Labour government then withdrew the permission the previous administration had approved. Now, this legal outcome could be compromised by an offshore tribunal answering to only the companies filing the suit.

In August, a company whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. Recently a tribunal in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. The public has little idea how much this could amount to. What legal team is acting on its behalf challenging the state? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a international entity disputes it through an undemocratic private court, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coalmine case was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows little of the case at present, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK imposed on him after the invasion of Ukraine. He has filed a claim against Luxembourg on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly budget. Part of the counsel acting for him in that case? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as security for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations may be obstructing the money Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this topic labelled critics of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Predictions that “when companies begin to understand the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with scepticism.

That warning has come to pass. This year, fossil fuel and mining firms have initiated a record number of suits against nations rich and poor, opposing – like the example of the UK mine – government attempts to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP