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How do you understand our system of government works? Perhaps similar to this. We elect MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that was how it used to work. Not anymore.

The Rise of Secret Courts

Today, overseas companies, or the wealthy individuals behind them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of commercial attorneys. Such disputes take place away from public scrutiny. Differing from national judiciaries, these bodies provide no avenue for appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even businesses based in this country. The door is open exclusively to businesses registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant compensation of vast sums, running into billions.

These sums are based not on actual losses but money the tribunal officials determine the company could potentially have made. The government could be forced to rescind the measure. It will be discouraged from introducing similar legislation in that area, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being filed, as companies observe each other, and investment funds bankroll lawsuits for a share of a share of the awards. The result? Sovereignty and democracy are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions made by parliaments is that this stipulation has been inserted – absent public approval, and frequently under an atmosphere of extreme secrecy – inside trade treaties.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the senior court. The justice determined that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on climate commitments. The new government then withdrew the licence the previous administration had approved. Currently, this legal outcome could be compromised by an offshore tribunal accountable to no one but the corporations bringing the case.

In August, a company whose beneficial owners reside in the Cayman Islands lodged a claim against the UK government. The previous week a tribunal in the US capital was convened to consider the case.

This firm is suing the UK for the profits it might have made if the mine had been permitted to proceed. The public has no clear indication how much this might be. What legal team is representing it challenging the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration passes a law, the domestic court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Case

On the same day that the tribunal on the coalmine case was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case at present, but it seems likely that he’ll use the tribunal to fight the sanctions the UK enacted against him following the Russian aggression. He has filed a claim against a small nation on these grounds, claiming a colossal sum: equivalent to half of state's annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts argue that the EU’s hesitation in using frozen state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Growing Threats

We were assured that these events wouldn’t happen. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” A consultant on this issue described campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear such legal actions. Predictions that “when companies begin to understand the authority they now possess, they will shift their focus from the poorer states to the developed economies” were dismissed with general mockery.

That prediction is now a reality. This year, fossil fuel and mining firms have lodged a record number of suits against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – official measures to stop global warming. Firms have so far won vast sums through ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP