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Can you understand our system of government operates? Perhaps something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills become law. Legislation are enforced by the courts. End of story. However, that used to be how it once functioned. Those days are over.

The Emergence of Secret Courts

Nowadays, foreign corporations, or the billionaires behind them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. Such disputes take place in secret. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including enterprises based in this country. Access is granted only to corporations registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it can award compensation of vast sums, even billions.

This compensation constitute not real financial harm but funds the tribunal officials conclude the company could potentially have made. The state could be forced to abandon its policy. It is deterred from introducing similar legislation of a similar nature, for fear of facing litigation.

A System Running Rampant

Record numbers of legal actions are being filed, as firms observe each other, and private equity finance suits in exchange for a share of the takings. The consequence? Sovereignty and democracy are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices taken by elected bodies is that this provision has been incorporated – without public consent, and frequently under a climate of profound opacity – within trade treaties.

A Concrete Instance: The UK Coalmine

A year ago, activists won a great victory at the senior court. The judge found that proposals to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The new government then withdrew the consent the Tories had granted. Today, this legal outcome is under threat by an secret arbitration panel reporting to only the entities filing the suit.

Last August, a firm whose final controllers reside in the offshore financial centre filed a lawsuit challenging the UK government. Recently a arbitration panel in the United States was established to hear it.

The claimant is suing the UK for the money it might have made if the mine had received permission to go ahead. We have no idea how much this could amount to. What legal team is serving as its counsel against the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The state makes a decision, the national judiciary validates it, then a international entity challenges it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coalmine case was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case at present, but it is highly possible that he will utilise the tribunal to fight the restrictions the UK enacted against him after the war in Ukraine. He has started suing another European state with similar intent, claiming sixteen billion dollars: an amount representing half nation's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars contend that the EU’s procrastination in using frozen Russian assets as collateral for its financial support package arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

Politicians promised that such things could not occur. Years ago, a senior politician, promoting the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade deal upon trade deal and there has never been a problem in the past.” An adviser on this topic labelled activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear such legal actions. Predictions that “once firms start to realise the authority they now possess, they will turn their attention from the weak nations to the wealthy nations” were met with scepticism.

That warning has now materialised. Recently, oil and gas and mining firms have lodged a record number of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to halt global warming. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP