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Can you perceive our system of government functions? Maybe something like this. We elect MPs. They vote on bills. When a majority is achieved, the bills pass into law. Legislation is maintained by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Advent of Secret Courts

Nowadays, foreign corporations, along with the billionaires who own them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held in secret. In contrast to domestic courts, these tribunals grant no avenue for appeal or judicial review. The general public are unable to file a case to them, nor can our government, including companies operating from this country. Access is granted only to corporations registered abroad.

If a tribunal finds that a law or policy might diminish the corporation’s projected profits, it can award damages of hundreds of millions of pounds, running into billions.

This compensation represent not tangible damages but money the panel members conclude the company would perhaps have made. The government might be compelled to rescind the measure. It is discouraged from enacting future policies along the same lines, worried about being sued.

A Process Growing Exponentially

Record numbers of disputes are being brought, as companies observe each other, and investment funds finance suits for a share of a share of the takings. The outcome? Democratic sovereignty and democratic governance are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings enacted by legislatures is that this provision has been incorporated – without democratic mandate, and frequently under a climate of total confidentiality – inside trade treaties.

A Concrete Example: The UK Coal Mine

Twelve months ago, activists won a great victory at the high court. The justice determined that schemes to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on our carbon budgets. The new government later cancelled the licence the former government had issued. Now, this success could be compromised by an foreign court answering to no one but the companies bringing the case.

During August, a firm whose beneficial owners reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a tribunal in the US capital was convened to hear it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to commence operations. We have no clear indication how much this could amount to. Which individual is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The government passes a law, the domestic court supports it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a elected official represents its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case so far, but it is highly possible that he’ll use the ISDS mechanism to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has filed a claim against a small nation on these grounds, claiming sixteen billion dollars: half that nation's annual revenue. Part of the lawyers acting for him in that case? Cherie Blair, married to the ex-UK leader.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as collateral for its financial support package is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over sovereign states could be blocking the funds Ukraine critically depends on.

False Assurances and Mounting Costs

Politicians promised that these scenarios wouldn’t happen. Previously, a government leader, promoting the largest and riskiest of all these agreements, declared: “We’ve signed trade deal upon trade deal and we have never seen a case in the past.” A consultant on this matter described campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries needed to fear such legal actions. Predictions that “once firms begin to understand the authority they’ve been granted, they will turn their attention from the poorer states to the strong ones” were dismissed with scepticism.

That threat is now a reality. In the current period, energy and mining firms have lodged a unprecedented number of suits against nations both wealthy and developing, challenging – like the example of the UK mine – government attempts to prevent global warming. Companies have thus far won $114bn by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP