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How do you reckon our system of government operates? It could be similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. That's it. Yet, that was how it once functioned. Those days are over.

The Emergence of Secret Tribunals

In the modern era, overseas companies, along with the oligarchs that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are held in secret. Differing from national judiciaries, these tribunals allow no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, including businesses headquartered in this country. They are open exclusively to businesses based overseas.

When a secret court finds that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

This compensation represent not tangible damages but funds the tribunal officials decide the company might otherwise have made. The government could be forced to drop the legislation. It will be hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being filed, as firms learn from each other, and hedge funds fund legal actions in exchange for a portion of the awards. The outcome? National sovereignty and popular rule are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the rulings enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and often in an atmosphere of profound opacity – inside trade treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the senior court. The judge determined that plans to excavate the first major coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine could have no impact on national carbon targets. The new government later cancelled the consent the former government had approved. Currently, this success is under threat by an secret arbitration panel accountable to only the companies filing the suit.

In August, a firm whose ultimate owners reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a dispute settlement body in the United States was established to hear it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had been allowed to proceed. We have little idea how much this might be. What legal team is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court supports it, then a foreign company challenges it through an undemocratic private court, and a sitting MP represents its behalf.

An Oligarch's Challenge

Concurrently that the panel on the mining lawsuit was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case at present, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK imposed on him subsequent to the Russian aggression. He has filed a claim against another European state on these grounds, demanding $16bn: half that state's yearly budget. Part of the counsel representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in using frozen Russian assets as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine critically depends on.

Misleading Claims and Mounting Costs

We were assured that these events wouldn’t happen. Previously, a former prime minister, advocating for the most significant and hazardous of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An adviser on this topic labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “as corporations begin to understand the authority they now possess, they will shift their focus from the weak nations to the strong ones” were met with general mockery.

That warning has now materialised. Recently, oil and gas and extraction companies have lodged a unprecedented number of cases against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – government attempts to halt environmental catastrophe. Corporations have to date won $114bn by using ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP