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Can you understand our system of government operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that’s how it used to work. No longer.

The Emergence of Offshore Tribunals

Today, international firms, and the billionaires behind them, can sue governments for the policies they pass, at secret arbitration panels composed of business advocates. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies allow no right of appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, including businesses headquartered in this country. They are open only to corporations operating from foreign soil.

When a secret court rules that a law or policy could harm the corporation’s expected profits, it may order damages of vast sums, even billions.

These awards are based not on tangible damages but compensation the arbitrators decide the company might otherwise have made. The state might be compelled to rescind the measure. It becomes hesitant to introducing similar legislation along the same lines, due to the risk of facing litigation.

A System Growing Exponentially

Record numbers of disputes are being filed, as firms learn from each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The result? National sovereignty and popular rule are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the decisions made by elected bodies is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of profound opacity – inside trade treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The justice determined that plans to open the first new deep coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on national carbon targets. The new government later cancelled the licence the previous administration had issued. Currently, this success faces being overturned by an secret arbitration panel reporting to no one but the companies petitioning it.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre filed a lawsuit versus the UK government. Last week a tribunal in the US capital was set up to consider the case.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to proceed. The public has no idea how much this might be. What legal team is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the national judiciary supports it, then a overseas corporation disputes it through an unaccountable private court, and a sitting MP works for its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it appears probable that he will utilise the tribunal to contest the penalties the UK levied against him after the Russian aggression. He has previously started suing Luxembourg for this reason, claiming a colossal sum: an amount representing half state's annual revenue. Part of the legal team acting for him in that case? a prominent lawyer, wife of the former British prime minister.

International law scholars believe that the EU’s delay in utilising seized Russian assets as collateral for its financial support package is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Costs

Politicians promised that such things could not occur. Years ago, a senior politician, championing the most significant and hazardous of all such treaties, told us: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this topic described activists of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms grasp the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were dismissed with general mockery.

That prediction has come to pass. This year, oil and gas and mining firms have lodged a historic level of suits against nations across the economic spectrum, challenging – like the example of the UK mine – state efforts to halt global warming. Corporations have to date won $114bn through ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP