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Can you reckon our system of government works? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. That's it. Well, that used to be how it once functioned. Not anymore.

The Emergence of Secret Courts

In the modern era, overseas companies, along with the oligarchs behind them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are conducted behind closed doors. Unlike our courts, these panels grant no avenue for appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even businesses based in this country. They are open exclusively to businesses based overseas.

If a tribunal determines that a legislative action may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums represent not real financial harm but compensation the tribunal officials conclude the company might otherwise have made. The state could be forced to abandon its policy. It will be discouraged from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being filed, as firms learn from each other, and private equity bankroll lawsuits for a share of a cut of the settlements. The outcome? Democratic sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the decisions made by legislatures is that this stipulation has been incorporated – without public consent, and frequently under a climate of extreme secrecy – inside bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The judge ruled that proposals to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine could have no impact on climate commitments. The Labour government then withdrew the consent the former government had issued. Now, this victory could be compromised by an offshore tribunal answering to only the corporations petitioning it.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a dispute settlement body in Washington DC was set up to consider the case.

This firm is litigating against the UK for the profits it could have earned if the mine had received permission to commence operations. We have no idea how much this sum represents. Which individual is representing it against the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a international entity contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

On the same day that the court on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know nothing of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the sanctions the UK imposed on him subsequent to the war in Ukraine. He has previously started suing Luxembourg with similar intent, claiming sixteen billion dollars: an amount representing half nation's yearly income. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in using frozen oligarchs' funds as security for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations could be blocking the money Ukraine urgently requires.

Empty Promises and Growing Costs

The public was told that these events wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” A consultant on this matter labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “when companies start to realise the authority they now possess, they will shift their focus from the poorer states to the developed economies” were greeted by widespread derision.

That prediction is now a reality. Recently, energy and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to stop environmental catastrophe. Companies have so far won $114bn through ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP