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Can you perceive our system of government operates? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. Yet, that’s how it once functioned. Not anymore.

The Rise of Secret Courts

Today, overseas companies, and the wealthy individuals behind them, have the power to sue governments for the laws they pass, at secret arbitration panels composed of business advocates. These proceedings are held behind closed doors. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even businesses based in this country. They are open only to businesses registered abroad.

Should an arbitration panel determines that a law or policy could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, running into billions.

These sums are based not on real financial harm but compensation the arbitrators determine 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, due to the risk of being sued.

A Process Growing Exponentially

Unprecedented levels of disputes are being brought, as companies take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the settlements. The result? Democratic sovereignty and democracy are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the rulings made by elected bodies is that this provision has been inserted – without democratic mandate, and often in a climate of total confidentiality – into bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The justice ruled that schemes to dig the first major coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no consequence on national carbon targets. The Labour government later cancelled the permission the former government had issued. Currently, this legal outcome faces being overturned by an foreign court accountable to exclusively the entities bringing the case.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands initiated proceedings against the UK government. The previous week a arbitration panel in the US capital was established to consider the case.

The claimant is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no idea how much this could amount to. What legal team is serving as its counsel in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK enacted against him subsequent to the Russian aggression. He has already started suing another European state for this reason, claiming sixteen billion dollars: equivalent to half of state's yearly budget. Included in the counsel representing him there? a prominent lawyer, married to the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen Russian assets as guarantee for its financial support package is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Escalating Threats

We were assured that these events were not possible. Years ago, a government leader, championing the biggest and most dangerous of all these agreements, declared: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” An expert on this topic accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations should be concerned by such legal actions. Warnings that “when companies start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were greeted by scepticism.

That threat has now materialised. This year, energy and resource corporations have initiated a record number of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – government attempts to stop climate breakdown. Corporations have so far won $114bn via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP