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What is your understand our system of government operates? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Rise of Secret Courts

Nowadays, overseas companies, along with the wealthy individuals behind them, have the power to sue elected administrations for the laws they pass, at private courts composed of commercial attorneys. These proceedings are held away from public scrutiny. Differing from national judiciaries, these bodies provide no opportunity to appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, including businesses operating from this country. The door is open exclusively to corporations registered abroad.

If a tribunal finds that a government measure could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These sums are based not on actual losses but compensation the tribunal officials determine the company could potentially have made. The government could be forced to abandon its policy. It becomes deterred from passing future laws in that area, due to the risk of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being brought, as corporations learn from each other, and investment funds finance suits in return for a cut of the settlements. The outcome? Democratic sovereignty and democracy are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the decisions made by elected bodies is that this clause has been incorporated – without democratic mandate, and typically amid a climate of profound opacity – into trade treaties.

A Concrete Example: The UK Coal Mine

A year ago, environmental campaigners secured a significant win at the high court. The judge ruled that schemes to excavate the first major coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have had zero effect on our carbon budgets. The Labour government later cancelled the consent the former government had approved. Now, this victory faces being overturned by an offshore tribunal accountable to exclusively the corporations petitioning it.

In August, a firm whose ultimate owners are located in the tax haven lodged a claim versus the UK government. Recently a arbitration panel in the US capital was convened to consider the case.

This firm is litigating against the UK for the revenue it could have earned if the mine had received permission to proceed. The public has no clear indication how much this could amount to. Who is acting on its behalf challenging the UK administration? An elected representative, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration passes a law, the high court upholds it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coalmine case was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows nothing of the case at present, but it is highly possible that he will utilise the tribunal to challenge the penalties the UK enacted against him after the Russian aggression. He has filed a claim against Luxembourg for this reason, seeking sixteen billion dollars: half that nation's yearly income. Among the lawyers representing him there? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Costs

Politicians promised that these events wouldn’t happen. Previously, a senior politician, championing the biggest and most dangerous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this issue labelled activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations begin to understand the power they now possess, they will shift their focus from the weak nations to the strong ones” were met with scepticism.

That warning has come to pass. This year, fossil fuel and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to prevent global warming. Firms have to date won vast sums via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP