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How do you reckon our system of government operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. No longer.

The Advent of Secret Courts

Nowadays, international firms, along with the oligarchs behind them, can sue nation states for the policies they pass, at offshore tribunals staffed by business advocates. These proceedings are held in secret. In contrast to domestic courts, these tribunals grant no avenue for appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even enterprises operating from this country. They are open solely for entities operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These awards constitute not real financial harm but money the panel members determine the company might otherwise have made. The administration may have to abandon its policy. It becomes discouraged from passing future laws along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being brought, as firms observe each other, and investment funds finance suits in exchange for a cut of the settlements. The result? National sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the choices enacted by elected bodies is that this stipulation has been inserted – absent public approval, and often in conditions of total confidentiality – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the high court. The judge determined that plans to open the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had granted. Today, this victory is under threat by an secret arbitration panel answering to no one but the entities filing the suit.

In August, a company whose final controllers are located in the offshore financial centre initiated proceedings versus the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The company is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. We have no clear indication how much this might be. Which individual is serving as its counsel in opposition to the state? A member of parliament, and ex-law officer in the outgoing administration, that great patriot the MP. The government passes a law, the high court supports it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case to date, but it seems likely that he will utilise the ISDS mechanism to contest the penalties the UK levied against him following the war in Ukraine. He has already started suing another European state with similar intent, claiming sixteen billion dollars: equivalent to half of nation's yearly budget. Part of the lawyers acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars contend that the EU’s hesitation in leveraging immobilised Russian assets as security for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine critically depends on.

Misleading Claims and Mounting Risks

We were assured that such things could not occur. Years ago, a former prime minister, advocating for the most significant and hazardous of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this matter labelled critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms grasp the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were met with scepticism.

That threat is now a reality. This year, energy and extraction companies have filed a record number of suits against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP