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How do you understand our system of government operates? Perhaps something like this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. That's it. Yet, that used to be how it operated in the past. Not anymore.

The Advent of Secret Arbitration Panels

Today, foreign corporations, and the billionaires behind them, have the power to sue governments for the laws they pass, at private courts composed of commercial attorneys. The cases are held in secret. In contrast to domestic courts, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies based in this country. The door is open solely for corporations operating from foreign soil.

If a tribunal determines that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, running into billions.

These sums represent not actual losses but money the tribunal officials determine the company might otherwise have made. The administration may have to drop the legislation. It will be hesitant to enacting future policies of a similar nature, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being filed, as corporations observe each other, and investment funds fund legal actions in return for a portion of the awards. The consequence? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings enacted by elected bodies is that this clause has been written – absent public approval, and frequently under conditions of profound opacity – into international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the High Court. The judge determined 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 extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government later cancelled the permission the Tories had granted. Currently, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the companies petitioning it.

In August, a firm whose ultimate owners are located in the Cayman Islands lodged a claim against the UK government. Last week a arbitration panel in the US capital was established to consider the case.

The company is litigating against the UK for the revenue it might have made if the mine had been allowed to proceed. The public has no clear indication how much this could amount to. Who is serving as its counsel in opposition to the state? An elected representative, and ex-law officer in the previous government, that great patriot the MP. The government makes a decision, the high court upholds it, then a overseas corporation challenges it through an unaccountable private court, and a elected official acts on its behalf.

A Sanctions Case

Simultaneously that the court on the coalmine case was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case at present, but it appears probable that he’ll use the tribunal to fight the restrictions the UK imposed on him following the Russian aggression. He has started suing a small nation with similar intent, demanding sixteen billion dollars: half that government’s annual revenue. Part of the lawyers on his side? the wife of a former prime minister, married to the former British prime minister.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

False Assurances and Escalating Costs

Politicians promised that such things were not possible. Previously, a former prime minister, championing the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and there has never been a case in the past.” An adviser on this matter described campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations begin to understand the power they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were met with general mockery.

That warning has come to pass. This year, fossil fuel and mining firms have initiated a unprecedented number of suits against nations both wealthy and developing, challenging – similar to the Whitehaven project – state efforts to prevent global warming. Corporations have so far won vast sums through ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP