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Can you perceive our system of government operates? It could be something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. That's it. Well, that was how it operated in the past. No longer.

The Emergence of Secret Courts

Today, foreign corporations, and the billionaires behind them, have the power to sue governments for the laws they pass, at offshore tribunals composed of corporate lawyers. The cases are held behind closed doors. In contrast to domestic courts, these panels grant no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including companies based in this country. The door is open solely for entities registered abroad.

If a tribunal determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

This compensation are based not on real financial harm but money the arbitrators decide the company might otherwise have made. The government may have to drop the legislation. It will be discouraged from passing future laws in that area, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as companies learn from each other, and investment funds finance suits for a share of a cut of the awards. The result? Sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices taken by parliaments is that this provision has been inserted – without public consent, and frequently under an atmosphere of total confidentiality – inside trade treaties.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the High Court. The justice determined that plans to excavate the first deep coalmine in the UK for three decades, in Cumbria, were wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have no consequence on climate commitments. The incoming administration later cancelled the permission the former government had approved. Today, this success is under threat by an foreign court accountable to only the entities filing the suit.

Last August, a company whose ultimate owners are based in the offshore financial centre filed a lawsuit against the UK government. Recently a dispute settlement body in the US capital was established to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. Citizens have no idea how much this could amount to. Who is acting on its behalf challenging the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The government makes a decision, the domestic court validates it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the coalmine case was established, we learned 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 to date, but it appears probable that he’ll use the arbitration process to challenge the sanctions the UK enacted against him after the war in Ukraine. He has filed a claim against another European state for this reason, claiming $16bn: an amount representing half nation's yearly income. Included in the lawyers on his side? Cherie Blair, wife of the ex-UK leader.

Legal experts argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Costs

The public was told that such things could not occur. Previously, a senior politician, advocating for the most significant and hazardous of all investment pacts, told us: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An expert on this topic labelled campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about these lawsuits. Warnings that “as corporations begin to understand the power they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That prediction has come to pass. Recently, oil and gas and resource corporations have filed a record number of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained the majority. That represents the combined GDP