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What is your understand our system of government operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. Yet, that’s how it used to work. No longer.

The Rise of Secret Courts

In the modern era, international firms, and the billionaires that control them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals made up of business advocates. Such disputes are held away from public scrutiny. Unlike our courts, these panels provide no right of appeal or judicial review. The general public are unable to file a case to them, and neither can our government, including enterprises operating from this country. Access is granted solely for entities operating from foreign soil.

When a secret court finds that a legislative action could harm the corporation’s projected profits, it can award damages of vast sums, potentially billions.

These sums constitute not real financial harm but compensation the panel members determine the company would perhaps have made. The administration may have to abandon its policy. It will be hesitant to enacting future policies in that area, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies observe each other, and private equity finance suits in return for a cut of the takings. The result? Democratic sovereignty and democratic governance are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the rulings enacted by legislatures is that this stipulation has been written – absent public approval, and typically amid conditions of extreme secrecy – within international trade agreements.

A Specific Example: The Cumbrian Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The justice found that plans to dig the first deep coalmine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the licence the former government had approved. Today, this victory could be compromised by an secret arbitration panel answering to only the corporations bringing the case.

In August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings against the UK government. Recently a arbitration panel in the United States was set up to hear it.

This firm is litigating against the UK for the money it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot the MP. The administration enacts a policy, the domestic court upholds it, then a foreign company disputes it through an secretive arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Challenge

On the same day that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case so far, but it appears probable that he may employ the arbitration process to contest the restrictions the UK imposed on him subsequent to the Russian aggression. He has already initiated proceedings against Luxembourg for this reason, claiming $16bn: equivalent to half of nation's yearly income. Included in the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

Trade specialists believe that the EU’s procrastination in using frozen Russian assets as security for its financial support package is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over democratic administrations could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

Politicians promised that these events wouldn’t happen. In 2014, a government leader, promoting the most significant and hazardous of all such treaties, told us: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this matter labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states needed to fear such legal actions. Warnings that “as corporations begin to understand the power bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That warning has now materialised. Recently, energy and resource corporations have filed a historic level of claims against nations rich and poor, opposing – similar to the UK mine – state efforts to halt climate breakdown. Firms have to date won vast sums via ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP