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How do you understand our system of government operates? It could be something like this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. That's it. However, that’s how it used to work. Not anymore.

The Emergence of Offshore Courts

Today, international firms, and the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases are held behind closed doors. In contrast to domestic courts, these bodies grant no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, including businesses operating from this country. Access is granted solely for corporations registered abroad.

When a secret court determines that a law or policy may compromise the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, potentially billions.

This compensation constitute not actual losses but compensation the arbitrators determine the company could potentially have made. The administration could be forced to drop the legislation. It will be deterred from enacting future policies along the same lines, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of disputes are being filed, as firms learn from each other, and investment funds finance suits in exchange for a share of the awards. The result? National sovereignty and popular rule are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the decisions made by legislatures is that this clause has been inserted – absent public approval, and frequently under an atmosphere of profound opacity – inside bilateral investment treaties.

A Real-World Case: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The justice found that proposals to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have had no consequence on national carbon targets. The new government then withdrew the licence the Tories had granted. Now, this success could be compromised by an foreign court reporting to exclusively the corporations bringing the case.

During August, a firm whose beneficial owners reside in the Cayman Islands lodged a claim against the UK government. Last week a arbitration panel in the United States was set up to hear it.

This firm is suing the UK for the money it could have earned if the mine had been permitted to commence operations. We have little idea how much this could amount to. Who is representing it against the British government? A member of parliament, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a international entity challenges it through an undemocratic private court, and a elected official represents its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case to date, but it seems likely that he will utilise the ISDS mechanism to contest the penalties the UK enacted against him after the invasion of Ukraine. He has already filed a claim against Luxembourg with similar intent, demanding a colossal sum: half that government’s yearly budget. Part of the counsel acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists believe that the EU’s delay in using frozen state funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that such things wouldn’t happen. Previously, a former prime minister, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this topic labelled campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “when companies start to realise the authority bestowed upon them, they will turn their attention from the weak nations to the developed economies” were dismissed with general mockery.

That warning has come to pass. This year, fossil fuel and resource corporations have lodged a record number of cases against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to stop global warming. Companies have thus far won vast sums through ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP