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What is your understand our system of government functions? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. That's it. Yet, that’s how it once functioned. Those days are over.

The Emergence of Secret Courts

Nowadays, international firms, along with the billionaires who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are held behind closed doors. In contrast to domestic courts, these tribunals grant no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises headquartered in this country. They are open exclusively to corporations operating from foreign soil.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it has the power to grant compensation of vast sums, even billions.

This compensation are based not on tangible damages but compensation the panel members determine the company might otherwise have made. The government might be compelled to abandon its policy. It will be discouraged from passing future laws in that area, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations learn from each other, and hedge funds fund legal actions for a share of a share of the awards. The result? National sovereignty and popular rule are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the choices made by parliaments is that this clause has been written – absent public approval, and frequently under conditions of profound opacity – into trade treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the high court. The justice determined that schemes to open the first new deep coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration then withdrew the licence the Tories had approved. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations petitioning it.

Last August, a company whose ultimate owners are based in the Cayman Islands lodged a claim versus the UK government. The previous week a arbitration panel in the United States was set up to hear it.

The claimant is litigating against the UK for the money it would have generated if the mine had received permission to go ahead. Citizens have no idea how much this sum represents. Who is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an secretive private court, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the court on the coal mine dispute was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know scarce of the case to date, but it appears probable that he may employ the arbitration process to challenge the sanctions the UK levied against him after the war in Ukraine. He has initiated proceedings against a small nation with similar intent, seeking a colossal sum: an amount representing half nation's yearly income. Included in the counsel on his side? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the finance Ukraine urgently requires.

Empty Promises and Escalating Threats

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, championing the most significant and hazardous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” An adviser on this issue labelled campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies grasp the influence they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were met with scepticism.

That warning is now a reality. This year, energy and resource corporations have initiated a historic level of claims against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to stop global warming. Corporations have to date won vast sums by using ISDS, of which oil majors have obtained the majority. That equates to the combined GDP