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How do you perceive our system of government operates? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills pass into law. Legislation is upheld by the courts. That's it. However, that was how it once functioned. Those days are over.

The Rise of Secret Courts

Nowadays, foreign corporations, and the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at private courts made up of business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, or even enterprises operating from this country. Access is granted exclusively to entities registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s anticipated profits, it may order financial penalties of vast sums, running into billions.

These sums are based not on tangible damages but money the arbitrators conclude the company would perhaps have made. The administration may have to abandon its policy. It will be discouraged from passing future laws in that area, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of disputes are being brought, as companies learn from each other, and investment funds bankroll lawsuits in return for a share of the settlements. The consequence? Sovereignty and democracy are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the decisions enacted by parliaments is that this clause has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – into trade treaties.

A Real-World Example: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the High Court. The justice found that schemes to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The new government later cancelled the licence the Tories had issued. Today, this success could be compromised by an secret arbitration panel accountable to only the entities bringing the case.

Last August, a company whose final controllers are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was set up to hear it.

This firm is litigating against the UK for the money it would have generated if the mine had received permission to proceed. The public has no idea how much this sum represents. Who is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration enacts a policy, the domestic court supports it, then a overseas corporation contests it through an undemocratic private court, and a member of our parliament represents its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case at present, but it seems likely that he’ll use the tribunal to challenge the sanctions the UK levied against him after the Russian aggression. He has already initiated proceedings against a small nation with similar intent, seeking sixteen billion dollars: half that nation's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars believe that the EU’s hesitation in leveraging immobilised Russian assets as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Growing Risks

The public was told that these events wouldn’t happen. In 2014, a senior politician, promoting the most significant and hazardous of all these agreements, told us: “The UK has signed investment treaty upon trade deal and there has not been a case in the past.” An expert on this topic described activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Predictions that “when companies begin to understand the influence bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were met with scepticism.

That warning has come to pass. In the current period, energy and extraction companies have initiated a historic level of cases against nations both wealthy and developing, challenging – similar to the Whitehaven project – government attempts to halt global warming. Firms have so far won $114bn by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP