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Can you reckon our system of government works? Perhaps something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. Well, that used to be how it once functioned. Not anymore.

The Emergence of Secret Courts

Nowadays, foreign corporations, or the billionaires that control them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these bodies provide no avenue for appeal or oversight by judges. You or I cannot take a case to them, nor can our government, including enterprises operating from this country. They are open exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a government measure might diminish the corporation’s projected profits, it can award financial penalties of vast sums, even billions.

These awards are based not on tangible damages but money the panel members determine the company would perhaps have made. The government may have to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as corporations learn from each other, and hedge funds finance suits in return for a portion of the settlements. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices enacted by parliaments is that this stipulation has been written – without democratic mandate, and often in a climate of profound opacity – within trade treaties.

A Specific Example: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the senior court. The judge determined that proposals to excavate the first major coal mine in the UK for a generation, in northwest England, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the licence the former government had granted. Today, this legal outcome is under threat by an offshore tribunal answering to only the corporations bringing the case.

Last August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. Last week a tribunal in the US capital was set up to adjudicate on it.

The company is suing the UK for the profits it might have made if the mine had received permission to proceed. We have little idea how much this might be. Who is serving as its counsel in opposition to the state? An elected representative, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The government passes a law, the high court supports it, then a overseas corporation contests it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the court on the coalmine case was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case to date, but it seems likely that he may employ the arbitration process to challenge the penalties the UK imposed on him following the invasion of Ukraine. He has already filed a claim against a small nation with similar intent, claiming sixteen billion dollars: an amount representing half government’s yearly budget. Among the counsel representing him there? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over elected governments could be blocking the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

Politicians promised that such things wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this issue labelled activists of “alarmism … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Predictions that “once firms begin to understand the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction has come to pass. This year, oil and gas and resource corporations have filed a record number of suits against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – official measures to halt global warming. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP