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Can you reckon our system of government works? Perhaps similar to this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. However, that used to be how it operated in the past. Those days are over.

The Rise of Secret Courts

In the modern era, international firms, or the billionaires that control them, are able to litigate against elected administrations for the policies they pass, at private courts composed of business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these bodies provide no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, or even companies based in this country. Access is granted solely for entities operating from foreign soil.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it can award financial penalties of vast sums, potentially billions.

This compensation are based not on tangible damages but money the arbitrators determine the company could potentially have made. The government may have to abandon its policy. It becomes hesitant to enacting future policies of a similar nature, for fear of being sued.

A Process Running Rampant

Historically high figures of disputes are being brought, as firms observe each other, and hedge funds fund legal actions in exchange for a cut of the settlements. The result? National sovereignty and popular rule are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the choices enacted by legislatures is that this clause has been incorporated – without public consent, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Last year, environmental campaigners secured a significant win at the senior court. The justice found that schemes to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have zero effect on national carbon targets. The new government later cancelled the licence the former government had granted. Today, this legal outcome is under threat by an offshore tribunal answering to exclusively the entities filing the suit.

Last August, a company whose final controllers are based in the offshore financial centre lodged a claim versus the UK government. Last week a arbitration panel in the US capital was established to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. Citizens have no clear indication how much this might be. Who is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a foreign company disputes it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the mining lawsuit was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case at present, but it is highly possible that he will utilise the arbitration process to contest the restrictions the UK levied against him after the war in Ukraine. He has filed a claim against Luxembourg on these grounds, seeking a colossal sum: equivalent to half of state's yearly budget. Among the legal team acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in using frozen state funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over democratic administrations could be blocking the funds Ukraine desperately needs.

False Assurances and Escalating Threats

Politicians promised that these scenarios could not occur. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, declared: “The UK has signed trade deal upon trade deal and we have never seen a issue in the past.” An expert on this issue labelled critics of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by these lawsuits. Predictions that “once firms start to realise the power they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That warning has come to pass. This year, oil and gas and extraction companies have lodged a unprecedented number of suits against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Firms have thus far won vast sums by using ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP