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Can you understand our system of government works? It could be along the lines of this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills become law. Statutes is maintained by the courts. End of story. Well, that’s how it used to work. Not anymore.

The Emergence of Secret Courts

In the modern era, overseas companies, along with the wealthy individuals who own them, can sue nation states for the regulations they pass, at offshore tribunals made up of commercial attorneys. These proceedings are conducted in secret. Differing from national judiciaries, these panels allow no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even enterprises headquartered in this country. The door is open solely for businesses operating from foreign soil.

If a tribunal finds that a government measure may compromise the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but funds the tribunal officials decide the company might otherwise have made. The state could be forced to rescind the measure. It is hesitant to enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as corporations learn from each other, and hedge funds fund legal actions for a share of a portion of the awards. The consequence? Sovereignty and democracy are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the decisions enacted by parliaments is that this stipulation has been inserted – without public consent, and often in a climate of extreme secrecy – into trade treaties.

A Specific Example: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the high court. The judge determined that proposals to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have had zero effect on climate commitments. The new government then withdrew the permission the former government had approved. Now, this victory is under threat by an offshore tribunal answering to no one but the entities petitioning it.

Last August, a firm whose beneficial owners are based in the tax haven initiated proceedings against the UK government. Last week a arbitration panel in Washington DC was set up to consider the case.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had received permission to proceed. We have little idea how much this might be. Who is acting on its behalf against the British government? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The government enacts a policy, the national judiciary supports it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows little of the case so far, but it is highly possible that he’ll use the ISDS mechanism to fight the sanctions the UK imposed on him after the invasion of Ukraine. He has previously started suing a small nation with similar intent, demanding $16bn: equivalent to half of state's yearly income. Among the counsel acting for him in that case? a prominent lawyer, wife of the previous PM.

Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments might be preventing the money Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that these events wouldn’t happen. Years ago, a government leader, championing the largest and riskiest of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” An expert on this matter labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the developed economies” were met with general mockery.

That prediction has now materialised. In the current period, energy and mining firms have lodged a unprecedented number of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – government attempts to stop environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP