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How do you perceive our system of government works? Maybe along the lines of this. We elect MPs. They vote on bills. If a majority is achieved, the bills become law. Legislation are enforced by the courts. That's it. Yet, that was how it used to work. Not anymore.

The Advent of Secret Courts

Nowadays, overseas companies, and the wealthy individuals that control them, can sue elected administrations for the laws they pass, at secret arbitration panels made up of commercial attorneys. The cases are conducted behind closed doors. In contrast to domestic courts, these tribunals provide no avenue for appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. The door is open only to businesses based overseas.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These awards constitute not actual losses but funds the tribunal officials determine the company could potentially have made. The government might be compelled to abandon its policy. It becomes hesitant to passing future laws in that area, worried about incurring a lawsuit.

A System Growing Exponentially

Historically high figures of legal actions are being filed, as companies take cues from each other, and hedge funds fund legal actions for a share of a portion of the settlements. The consequence? Democratic sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions enacted by legislatures is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of total confidentiality – inside trade treaties.

A Real-World Case: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice found that proposals to dig the first major coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration subsequently revoked the permission the previous administration had approved. Now, this victory faces being overturned by an foreign court accountable to no one but the companies filing the suit.

During August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit versus the UK government. Recently a tribunal in the United States was established to consider the case.

This firm is litigating against the UK for the money it might have made if the mine had been allowed to proceed. We have little idea how much this could amount to. Who is acting on its behalf challenging the British government? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the domestic court validates it, then a overseas corporation contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know scarce of the case so far, but it seems likely that he may employ the arbitration process to fight the sanctions the UK enacted against him subsequent to the war in Ukraine. He has initiated proceedings against a small nation with similar intent, claiming a colossal sum: an amount representing half nation's yearly budget. Part of the counsel representing him there? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized Russian assets as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

The public was told that these events were not possible. Years ago, a government leader, promoting the largest and riskiest of all these agreements, stated: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” An adviser on this issue labelled campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations should be concerned by these lawsuits. Warnings that “as corporations grasp the authority they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were greeted by scepticism.

That warning has come to pass. In the current period, oil and gas and resource corporations have initiated a historic level of cases against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP