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What is your perceive our system of government functions? It could be something like this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Legislation are enforced by the courts. Simple as that. Yet, that’s how it once functioned. Not anymore.

The Rise of Secret Courts

Nowadays, international firms, or the oligarchs who own them, are able to litigate against nation states for the policies they pass, at offshore tribunals composed of commercial attorneys. These proceedings are held in secret. Unlike our courts, these tribunals grant no opportunity to appeal or judicial review. You or I cannot take a case to them, and neither can our government, including enterprises based in this country. Access is granted solely for entities operating from foreign soil.

If a tribunal determines that a legislative action could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These awards constitute not real financial harm but compensation the tribunal officials decide the company would perhaps have made. The state might be compelled to abandon its policy. It will be deterred from introducing similar legislation in that area, worried about facing litigation.

A Process Running Rampant

Historically high figures of cases are being brought, as corporations observe each other, and private equity finance suits for a share of a cut of the takings. The outcome? Democratic sovereignty and popular rule are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the decisions taken by legislatures is that this clause has been incorporated – without public consent, and often in a climate of profound opacity – into trade treaties.

A Specific Instance: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the high court. The judge found that plans to open the first new deep coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have had no consequence on national carbon targets. The incoming administration subsequently revoked the permission the previous administration had approved. Now, this success is under threat by an secret arbitration panel answering to exclusively the entities filing the suit.

Last August, a corporate entity whose final controllers are located in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in the US capital was set up to adjudicate on it.

The company is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this might be. What legal team is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

A Sanctions Challenge

On the same day that the panel on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it is highly possible that he will utilise the ISDS mechanism to contest the sanctions the UK enacted against him after the Russian aggression. He has already filed a claim against Luxembourg on these grounds, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Among the counsel on his side? a prominent lawyer, married to the ex-UK leader.

Trade specialists contend that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine urgently requires.

False Assurances and Growing Costs

We were assured that these scenarios were not possible. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this topic labelled critics of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “as corporations begin to understand the influence they’ve been granted, they will shift their focus from the weak nations to the developed economies” were met with general mockery.

That threat has come to pass. This year, fossil fuel and extraction companies have lodged a historic level of suits against nations across the economic spectrum, contesting – similar to the UK mine – state efforts to halt global warming. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP