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Can you understand our system of government works? Perhaps something like this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that’s how it once functioned. Those days are over.

The Rise of Secret Courts

In the modern era, overseas companies, and the billionaires that control them, are able to litigate against governments for the regulations they pass, at offshore tribunals made up of business advocates. The cases take place in secret. Differing from national judiciaries, these panels allow no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, including companies based in this country. They are open only to entities operating from foreign soil.

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

These awards constitute not real financial harm but funds the panel members determine the company might otherwise have made. The state could be forced to rescind the measure. It becomes discouraged from introducing similar legislation in that area, worried about incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as companies observe each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The consequence? National sovereignty and democracy are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the decisions taken by legislatures is that this stipulation has been inserted – absent public approval, and often in conditions of extreme secrecy – within trade treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer ruled that schemes to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have had zero effect on climate commitments. The new government then withdrew the licence the Tories had issued. Now, this success could be compromised by an foreign court reporting to exclusively the entities petitioning it.

During August, a firm whose ultimate owners are located in the Cayman Islands lodged a claim against the UK government. Last week a dispute settlement body in Washington DC was convened to hear it.

The claimant is suing the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. Which individual is serving as its counsel challenging the state? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

On the same day that the court on the coal mine dispute was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case so far, but it seems likely that he may employ the ISDS mechanism to fight the penalties the UK enacted against him following the invasion of Ukraine. He has initiated proceedings against Luxembourg with similar intent, seeking a colossal sum: equivalent to half of state's yearly budget. Part of the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised Russian assets as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over sovereign states might be preventing the funds Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that such things wouldn’t happen. In 2014, a former prime minister, championing the largest and riskiest of all such treaties, told us: “We’ve signed investment treaty upon trade deal and we have never seen a case in the past.” An expert on this topic described campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “once firms grasp the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by scepticism.

That threat has now materialised. In the current period, fossil fuel and resource corporations have lodged a record number of suits against nations across the economic spectrum, contesting – similar to the Whitehaven project – government attempts to halt climate breakdown. Companies have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP