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Can you reckon our system of government works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. Simple as that. However, that was how it once functioned. No longer.

The Advent of Secret Tribunals

In the modern era, overseas companies, and the oligarchs that control them, can sue nation states for the regulations they pass, at offshore tribunals composed of business advocates. These proceedings are conducted behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, including businesses headquartered in this country. The door is open solely for entities registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s expected profits, it has the power to grant damages of vast sums, even billions.

This compensation represent not actual losses but compensation the panel members determine the company might otherwise have made. The administration might be compelled to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, worried about facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being brought, as companies observe each other, and hedge funds fund legal actions for a share of a cut of the takings. The consequence? Democratic sovereignty and popular rule are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the choices enacted by legislatures is that this provision has been inserted – without public consent, and often in an atmosphere of total confidentiality – inside trade treaties.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice determined that schemes to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have had no consequence on climate commitments. The Labour government later cancelled the consent the Tories had issued. Currently, this success is under threat by an secret arbitration panel answering to exclusively the corporations filing the suit.

During August, a firm whose beneficial owners are located in the Cayman Islands initiated proceedings against the UK government. The previous week a tribunal in the United States was established to hear it.

The company is suing the UK for the profits it might have made if the mine had received permission to go ahead. The public has little idea how much this might be. What legal team is serving as its counsel against the UK administration? A member of parliament, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Case

Concurrently that the tribunal on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the penalties the UK levied against him following the war in Ukraine. He has initiated proceedings against a small nation on these grounds, demanding sixteen billion dollars: an amount representing half government’s annual revenue. Part of the legal team on his side? Cherie Blair, wife of the former British prime minister.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over elected governments might be preventing the funds Ukraine critically depends on.

Misleading Claims and Escalating Costs

Politicians promised that such things wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An adviser on this topic described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the power they’ve been granted, they will shift their focus from the poorer states to the developed economies” were dismissed with widespread derision.

That prediction has come to pass. This year, oil and gas and extraction companies have filed a record number of cases against nations rich and poor, opposing – similar to the Whitehaven project – official measures to stop global warming. Firms have thus far won $114bn through ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP