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How do you understand our system of government works? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. Statutes is maintained by the courts. End of story. Well, that used to be how it once functioned. Those days are over.

The Rise of Secret Tribunals

Nowadays, overseas companies, along with the oligarchs behind them, can sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these tribunals grant no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, and neither can our government, including companies operating from this country. The door is open solely for businesses registered abroad.

Should an arbitration panel determines that a law or policy may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These sums constitute not tangible damages but funds the tribunal officials determine the company would perhaps have made. The government might be compelled to rescind the measure. It is discouraged from passing future laws of a similar nature, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being filed, as firms learn from each other, and investment funds fund legal actions in return for a portion of the awards. The outcome? Democratic sovereignty and democracy are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the rulings taken by legislatures is that this stipulation has been incorporated – without public consent, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Real-World Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge found that plans to dig the first major coal mine in the UK for a generation, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration later cancelled the permission the previous administration had approved. Now, this victory faces being overturned by an secret arbitration panel accountable to exclusively the companies petitioning it.

In August, a firm whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. The previous week a tribunal in Washington DC was established to consider the case.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to commence operations. We have little idea how much this sum represents. What legal team is representing it in opposition to the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case to date, but it seems likely that he’ll use the ISDS mechanism to fight the restrictions the UK enacted against him following the invasion of Ukraine. He has previously started suing Luxembourg for this reason, seeking sixteen billion dollars: an amount representing half government’s yearly income. Included in the counsel on his side? 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 financial support package stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Costs

The public was told that such things could not occur. Years ago, a former prime minister, promoting the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this matter accused campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “once firms start to realise the power they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. Recently, fossil fuel and extraction companies have filed a unprecedented number of suits against nations rich and poor, contesting – similar to the Whitehaven project – official measures to prevent global warming. Firms have to date won $114bn through ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP