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How do you understand our system of government operates? Maybe something like this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes are enforced by the courts. End of story. However, that’s how it operated in the past. Not anymore.

The Rise of Secret Tribunals

In the modern era, foreign corporations, along with the billionaires who own them, have the power to sue governments for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases take place behind closed doors. Unlike our courts, these panels allow no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even companies headquartered in this country. The door is open only to businesses registered abroad.

When a secret court rules that a legislative action could harm the corporation’s projected profits, it has the power to grant damages of vast sums, running into billions.

These awards represent not real financial harm but funds the panel members conclude the company might otherwise have made. The state could be forced to rescind the measure. It is discouraged from passing future laws along the same lines, due to the risk of being sued.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations learn from each other, and private equity fund legal actions in exchange for a portion of the awards. The result? Democratic sovereignty and popular rule are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices enacted by elected bodies is that this clause has been written – absent public approval, and frequently under an atmosphere of profound opacity – into trade treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, activists won a great victory at the senior court. The presiding officer determined that proposals to open the first new deep coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration subsequently revoked the licence the previous administration had granted. Currently, this victory could be compromised by an secret arbitration panel answering to exclusively the entities filing the suit.

In August, a corporate entity whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. Last week a tribunal in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has little idea how much this could amount to. Which individual is representing it in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the previous government, that great patriot the MP. The government makes a decision, the high court supports it, then a international entity challenges it through an unaccountable offshore tribunal, and a sitting MP acts on its behalf.

The Russian Case

Concurrently that the court on the mining lawsuit was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he may employ the tribunal to contest the penalties the UK enacted against him after the Russian aggression. He has previously started suing Luxembourg for this reason, seeking $16bn: half that government’s yearly income. Among the lawyers representing him there? a prominent lawyer, spouse of the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized state funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations could be blocking the finance Ukraine desperately needs.

Misleading Claims and Growing Risks

We were assured that these scenarios wouldn’t happen. Previously, a government leader, promoting the largest and riskiest of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has never been a issue in the past.” A consultant on this issue accused activists of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “once firms grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That warning has now materialised. In the current period, energy and mining firms have lodged a unprecedented number of claims against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Firms have to date won $114bn via ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP