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What is your perceive our system of government functions? Perhaps something like this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Emergence of Secret Courts

Today, international firms, along with the oligarchs behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels composed of business advocates. Such disputes are held in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies operating from this country. They are open solely for corporations operating from foreign soil.

If a tribunal determines that a government measure could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on actual losses but funds the panel members determine the company could potentially have made. The state could be forced to abandon its policy. It is deterred from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as companies observe each other, and private equity bankroll lawsuits for a share of a cut of the awards. The result? Democratic sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the choices made by legislatures is that this clause has been incorporated – without public consent, and often in a climate of profound opacity – within trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

A year ago, activists achieved a major legal triumph at the high court. The presiding officer ruled that plans to open the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no impact on national carbon targets. The incoming administration subsequently revoked the permission the Tories had issued. Now, this success could be compromised by an secret arbitration panel answering to exclusively the corporations filing the suit.

During August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit against the UK government. Last week a arbitration panel in the United States was established to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had received permission to proceed. We have no idea how much this might be. Who is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a international entity disputes it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case at present, but it seems likely that he may employ the tribunal to contest the restrictions the UK levied against him after the war in Ukraine. He has previously initiated proceedings against Luxembourg for this reason, demanding $16bn: equivalent to half of government’s annual revenue. Included in the legal team on his side? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in utilising seized oligarchs' funds as security for its financial support package is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations may be obstructing the money Ukraine urgently requires.

Misleading Claims and Growing Costs

We were assured that such things wouldn’t happen. Previously, a senior politician, advocating for the largest and riskiest of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” An expert on this topic accused campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “as corporations grasp the power they’ve been granted, they will turn their attention from the weak nations to the developed economies” were met with widespread derision.

That prediction has now materialised. In the current period, oil and gas and mining firms have initiated a record number of cases against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to halt climate breakdown. Firms have so far won $114bn via ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP