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Can you perceive our system of government functions? Perhaps along the lines of 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’s how it operated in the past. Not anymore.

The Advent of Secret Courts

In the modern era, international firms, or the wealthy individuals behind them, are able to litigate against elected administrations for the laws they pass, at private courts made up of commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted exclusively to businesses based overseas.

When a secret court determines that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

These sums constitute not real financial harm but money the arbitrators conclude the company might otherwise have made. The state could be forced to drop the legislation. It will be hesitant to passing future laws along the same lines, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being brought, as firms take cues from each other, and private equity fund legal actions in return for a portion of the takings. The outcome? Sovereignty and democratic governance are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the rulings made by elected bodies is that this stipulation has been inserted – without public consent, and frequently under a climate of extreme secrecy – within international trade agreements.

A Concrete Instance: The UK Coalmine

Twelve months ago, activists secured a significant win at the High Court. The presiding officer ruled that plans to excavate the first major coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine would have had no impact on climate commitments. The Labour government subsequently revoked the permission the former government had issued. Today, this legal outcome could be compromised by an foreign court answering to only the corporations petitioning it.

During August, a corporate entity whose beneficial owners reside in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to proceed. We have little idea how much this sum represents. Which individual is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coal mine dispute was convened, information emerged from a government response 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 may employ the arbitration process to challenge the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has already filed a claim against another European state on these grounds, demanding sixteen billion dollars: equivalent to half of state's yearly income. Included in the counsel representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that such things were not possible. In 2014, a former prime minister, advocating for the largest and riskiest of all investment pacts, declared: “We’ve signed trade agreement upon trade deal and we have never seen a case in the past.” An expert on this matter described campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states had to worry about such legal actions. Predictions that “as corporations begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with scepticism.

That prediction has now materialised. This year, energy and extraction companies have lodged a unprecedented number of cases against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to halt global warming. Corporations have to date won vast sums through ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP