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Can you understand our system of government functions? Maybe similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. However, that’s how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, overseas companies, and the billionaires that control them, have the power to sue elected administrations for the policies they pass, at private courts composed of business advocates. Such disputes are conducted in secret. In contrast to domestic courts, these tribunals grant no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even companies operating from this country. They are open solely for businesses based overseas.

When a secret court finds that a government measure could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

These awards constitute not actual losses but funds the tribunal officials decide the company might otherwise have made. The state might be compelled to drop the legislation. It becomes discouraged from passing future laws in that area, for fear of facing litigation.

A Process Growing Exponentially

Unprecedented levels of cases are being filed, as firms learn from each other, and investment funds bankroll lawsuits in exchange for a portion of the takings. The result? Democratic sovereignty and democracy are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the decisions made by parliaments is that this clause has been written – without public consent, and typically amid an atmosphere of extreme secrecy – within international trade agreements.

A Real-World Example: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The justice found that proposals to open the first major coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have no impact on national carbon targets. The Labour government subsequently revoked the permission the former government had approved. Now, this success faces being overturned by an foreign court reporting to exclusively the corporations filing the suit.

During August, a firm whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to commence operations. The public has no clear indication how much this might be. What legal team is serving as its counsel in opposition to the state? A sitting MP, and ex-law officer in the previous government, the noted patriot the MP. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case to date, but it seems likely that he will utilise the tribunal to contest the restrictions the UK levied against him subsequent to the war in Ukraine. He has already filed a claim against another European state on these grounds, demanding a colossal sum: half that state's yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Trade specialists contend that the EU’s delay in leveraging immobilised Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over democratic administrations could be blocking the finance Ukraine urgently requires.

Empty Promises and Escalating Risks

We were assured that these events could not occur. In 2014, a former prime minister, advocating for the largest and riskiest of all these agreements, stated: “We’ve signed trade deal upon trade deal and there has never been a problem in the past.” An expert on this topic described activists of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms grasp the influence they now possess, they will turn their attention from the weak nations to the strong ones” were dismissed with scepticism.

That prediction has come to pass. This year, oil and gas and resource corporations have filed a record number of cases against nations rich and poor, contesting – as in the case of the Whitehaven project – government attempts to stop climate breakdown. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP