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What is your perceive our system of government functions? Maybe similar to this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that’s how it used to work. Those days are over.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, or the oligarchs who own them, have the power to sue elected administrations for the laws they pass, at offshore tribunals composed of commercial attorneys. Such disputes are held away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

When a secret court determines that a law or policy could harm the corporation’s anticipated profits, it may order damages of vast sums, running into billions.

These awards are based not on actual losses but compensation the tribunal officials determine the company might otherwise have made. The government may have to drop the legislation. It is hesitant to introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Running Rampant

Record numbers of cases are being initiated, as firms observe each other, and private equity bankroll lawsuits in exchange for a share of the awards. The consequence? Sovereignty and democracy are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the choices enacted by elected bodies is that this clause has been incorporated – absent public approval, and frequently under conditions of profound opacity – inside international trade agreements.

A Real-World Case: The Cumbrian Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge determined that plans to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the permission the former government had issued. Currently, this legal outcome faces being overturned by an secret arbitration panel answering to no one but the entities filing the suit.

During August, a company whose beneficial owners are based in the offshore financial centre lodged a claim versus the UK government. The previous week a dispute settlement body in Washington DC was established to consider the case.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this might be. What legal team is representing it in opposition to the state? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the domestic court validates it, then a foreign company contests it through an secretive private court, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case so far, but it seems likely that he’ll use the tribunal to fight the sanctions the UK enacted against him following the invasion of Ukraine. He has filed a claim against another European state for this reason, claiming a colossal sum: an amount representing half government’s annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Legal experts argue that the EU’s delay in leveraging immobilised Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Risks

Politicians promised that these events wouldn’t happen. Previously, a former prime minister, championing the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal after trade deal and there has not been a case in the past.” An adviser on this issue labelled critics of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by ISDS claims. Warnings that “once firms begin to understand the authority bestowed upon them, they will turn their attention from the poorer states to the strong ones” were greeted by scepticism.

That threat has now materialised. Recently, oil and gas and resource corporations have initiated a record number of cases against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to stop global warming. Firms have to date won $114bn by using ISDS, of which energy giants have obtained the majority. That represents the combined GDP