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How do you perceive our system of government works? Maybe something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills become law. Statutes are enforced by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Rise of Secret Tribunals

In the modern era, foreign corporations, and the wealthy individuals behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals made up of commercial attorneys. These proceedings are held in secret. Unlike our courts, these panels grant no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises headquartered in this country. Access is granted only to entities operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s projected profits, it can award compensation of hundreds of millions, potentially billions.

These sums represent not actual losses but money the panel members conclude the company would perhaps have made. The administration could be forced to drop the legislation. It will be deterred from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and private equity finance suits for a share of a portion of the takings. The result? Democratic sovereignty and democracy are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the decisions taken by legislatures is that this stipulation has been written – absent public approval, and often in conditions of profound opacity – within bilateral investment treaties.

A Specific Example: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the high court. The presiding officer ruled that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have no impact on our carbon budgets. The Labour government then withdrew the consent the former government had approved. Now, this legal outcome faces being overturned by an secret arbitration panel answering to only the corporations filing the suit.

During August, a firm whose final controllers are located in the Cayman Islands filed a lawsuit challenging the UK government. Last week a dispute settlement body in the US capital was set up to hear it.

This firm is suing the UK for the money it could have earned if the mine had been allowed to go ahead. The public has no idea how much this could amount to. Which individual is acting on its behalf challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the domestic court upholds it, then a overseas corporation disputes it through an secretive private court, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coalmine case was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case so far, but it appears probable that he may employ the tribunal to fight the sanctions the UK imposed on him following the Russian aggression. He has previously started suing another European state on these grounds, demanding a colossal sum: equivalent to half of state's annual revenue. Part of the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

International law scholars believe that the EU’s delay in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments could be blocking the finance Ukraine desperately needs.

Misleading Claims and Mounting Risks

Politicians promised that these scenarios wouldn’t happen. Previously, a government leader, promoting the most significant and hazardous of all investment pacts, stated: “The UK has signed trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this issue described critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear these lawsuits. Predictions that “when companies start to realise the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with scepticism.

That threat has come to pass. In the current period, fossil fuel and resource corporations have filed a record number of suits against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to prevent global warming. Firms have so far won $114bn by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP