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How do you understand our system of government operates? It could be along the lines of this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. That's it. Yet, that’s how it operated in the past. Those days are over.

The Emergence of Secret Courts

In the modern era, overseas companies, or the wealthy individuals behind them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels composed of business advocates. The cases take place in secret. In contrast to domestic courts, these panels grant no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including companies based in this country. They are open only to businesses based overseas.

When a secret court determines that a law or policy could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but compensation the panel members conclude the company would perhaps have made. The state could be forced to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, for fear of being sued.

A System Running Rampant

Historically high figures of cases are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The consequence? Democratic sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings taken by elected bodies is that this provision has been written – absent public approval, and often in an atmosphere of profound opacity – into international trade agreements.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The presiding officer ruled that proposals to dig the first new deep coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the former government had issued. Now, this success could be compromised by an offshore tribunal accountable to no one but the corporations filing the suit.

In August, a company whose beneficial owners are based in the tax haven filed a lawsuit versus the UK government. Last week a arbitration panel in the US capital was set up to adjudicate on it.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to go ahead. Citizens have no clear indication how much this could amount to. Who is representing it in opposition to the state? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

Simultaneously that the court on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case so far, but it seems likely that he will utilise the ISDS mechanism to contest the sanctions the UK imposed on him following the war in Ukraine. He has filed a claim against a small nation on these grounds, claiming sixteen billion dollars: an amount representing half state's yearly income. Among the counsel acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Legal experts believe that the EU’s hesitation in using frozen state funds as collateral 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 bilateral investment treaty. This extraordinary, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

Empty Promises and Mounting Risks

We were assured that such things wouldn’t happen. In 2014, a senior politician, championing the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade agreement upon trade deal and there has never been a case in the past.” An adviser on this matter accused activists of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the weak nations to the strong ones” were met with widespread derision.

That warning is now a reality. In the current period, energy and extraction companies have lodged a record number of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – state efforts to halt global warming. Companies have so far won $114bn via ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP