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Can you reckon our system of government operates? Maybe something like this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that was how it operated in the past. Those days are over.

The Rise of Secret Courts

Nowadays, overseas companies, or the wealthy individuals who own them, have the power to sue nation states for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases are conducted in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses based in this country. The door is open exclusively to corporations operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

These sums constitute not real financial harm but funds the panel members conclude the company would perhaps have made. The state might be compelled to abandon its policy. It will be discouraged from introducing similar legislation of a similar nature, for fear of being sued.

A System Spiralling Out of Control

Record numbers of disputes are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the takings. The consequence? Sovereignty and democracy are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the rulings made by legislatures is that this provision has been inserted – without public consent, and often in an atmosphere of extreme secrecy – within trade treaties.

A Real-World Example: The Cumbrian Coal Mine

Last year, activists won a great victory at the senior court. The presiding officer ruled that proposals to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine could have zero effect on our carbon budgets. The incoming administration then withdrew the licence the Tories had granted. Now, this victory could be compromised by an foreign court answering to no one but the companies petitioning it.

Last August, a company whose ultimate owners are located in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was set up to hear it.

The claimant is litigating against the UK for the money it would have generated if the mine had received permission to proceed. The public has little idea how much this might be. What legal team is representing it in opposition to the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The government passes a law, the high court validates it, then a foreign company disputes it through an unaccountable offshore tribunal, and a elected official works for its behalf.

A Sanctions Challenge

On the same day that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it seems likely that he may employ the ISDS mechanism to challenge the restrictions the UK levied against him after the war in Ukraine. He has already started suing a small nation on these grounds, claiming a colossal sum: an amount representing half government’s yearly budget. Part of the counsel on his side? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s delay in utilising seized Russian assets as collateral for its loan to Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations may be obstructing the finance Ukraine desperately needs.

False Assurances and Growing Threats

The public was told that these scenarios wouldn’t happen. Previously, a senior politician, championing the largest and riskiest of all these agreements, told us: “We’ve signed trade deal upon trade deal and there has never been a case in the past.” An adviser on this issue accused critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “when companies grasp the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were greeted by widespread derision.

That prediction has come to pass. In the current period, oil and gas and mining firms have initiated a record number of suits against nations rich and poor, opposing – similar to the UK mine – official measures to halt climate breakdown. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP