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How do you reckon our system of government functions? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. End of story. However, that’s how it operated in the past. No longer.

The Rise of Secret Tribunals

In the modern era, overseas companies, and the oligarchs who own them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. They are open solely for entities based overseas.

If a tribunal finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but compensation the tribunal officials conclude the company might otherwise have made. The administration may have to drop the legislation. It is discouraged from enacting future policies of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Record numbers of cases are being brought, as corporations take cues from each other, and hedge funds fund legal actions in return for a cut of the settlements. The result? National sovereignty and democracy are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the choices made by parliaments is that this provision has been inserted – absent public approval, and often in a climate of total confidentiality – into international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Last year, activists achieved a major legal triumph at the high court. The judge found that schemes to open the first deep coalmine in the UK for three decades, in northwest England, had been wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The incoming administration then withdrew the licence the former government had approved. Currently, this success could be compromised by an secret arbitration panel accountable to only the companies petitioning it.

In August, a firm whose ultimate owners are based in the tax haven filed a lawsuit challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to consider the case.

The company is suing the UK for the money it would have generated if the mine had received permission to proceed. We have little idea how much this could amount to. Who is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

Simultaneously that the court on the mining lawsuit was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case to date, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK imposed on him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg on these grounds, seeking sixteen billion dollars: an amount representing half nation's yearly income. Among the legal team acting for him in that case? Cherie Blair, wife of the previous PM.

Legal experts believe that the EU’s procrastination in using frozen state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Threats

The public was told that these scenarios wouldn’t happen. In 2014, a government leader, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this topic accused campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations should be concerned by such legal actions. Warnings that “when companies begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That warning has now materialised. Recently, oil and gas and resource corporations have filed a historic level of suits against nations across the economic spectrum, contesting – like the example of the UK mine – government attempts to prevent global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP